PPF vs EPF vs NPS: Which Retirement Scheme is Right for You?
Compare India's top retirement schemes for long-term goals.
India's three main government-backed retirement instruments each serve a different investor. PPF is voluntary and fully flexible. EPF is mandatory for salaried employees but comes with employer contribution. NPS offers market-linked returns but forces partial annuitisation. Here is how to choose.
PPF — Public Provident Fund
PPF is open to all Indian residents including the self-employed. Current interest rate: 7.1% per annum (compounded annually, declared quarterly by the government). Lock-in: 15 years, extendable in 5-year blocks. Annual contribution: ₹500 minimum, ₹1.5 lakh maximum. Tax treatment: EEE — contribution qualifies for 80C, interest is tax-free, maturity is tax-free.
Best for: Self-employed individuals, those who want a guaranteed, government-backed tax-free return, or those looking for risk-free 80C investment beyond their EPF.
PPF Calculator → https://calculatordesk.in/ppf-calculator
EPF — Employees' Provident Fund
EPF is mandatory for employees at establishments with 20+ workers drawing salary up to ₹15,000/month (though most companies enroll all employees). Contribution: 12% of basic salary from the employee + 12% from the employer (of which 8.33% goes to EPS — pension scheme, and 3.67% to EPF). Current EPF interest rate: 8.25% p.a. for FY 2023-24. Tax: EEE up to certain limits — interest on employee contributions above ₹2.5 lakh/year is taxable.
Best for: Salaried employees — the employer contribution is essentially free money. There is rarely a reason to opt out of EPF.
EPF Calculator → https://calculatordesk.in/epf-calculator
NPS — National Pension System
NPS is open to all Indian citizens aged 18–70. Your contributions are invested in a mix of equity (E), corporate bonds (C), and government securities (G) — allocation of your choice, or auto-selected by age. Returns are market-linked, not guaranteed. Tax: ₹1.5 lakh under 80C + additional ₹50,000 under 80CCD(1B) — this extra ₹50K deduction is NPS's biggest advantage. At maturity (age 60), 60% of corpus can be withdrawn tax-free; 40% must be used to purchase an annuity (pension), which is then taxed as income.
Best for: Individuals in the 30% tax bracket who have already exhausted their ₹1.5 lakh 80C limit and want additional tax savings via the ₹50,000 80CCD(1B) deduction.
NPS Calculator → https://calculatordesk.in/nps-calculator
Head-to-Head Comparison
*EPF interest on employee contributions above ₹2.5L/year is taxable from FY 2021-22.
| Feature | PPF | EPF | NPS |
|---|---|---|---|
| Who can use | Anyone | Salaried only | Anyone (18–70) |
| Returns | 7.1% (fixed) | 8.25% (fixed) | 8–12% (market-linked) |
| Employer contribution | No | Yes (12% of basic) | Optional (govt: 14%) |
| Tax on maturity | Tax-free | Tax-free* | 60% tax-free, 40% annuity taxable |
| Liquidity | Partial from year 7 | Partial, job change | Locked till 60 |
| Risk | None | None | Market risk on equity portion |
| Extra 80C benefit | Within ₹1.5L | Within ₹1.5L | Extra ₹50K (80CCD 1B) |
Bottom Line
Start with EPF (mandatory, employer contribution is free). Add PPF if you are self-employed or want guaranteed tax-free returns beyond EPF. Consider NPS only after exhausting ₹1.5 lakh 80C limit — the extra ₹50,000 deduction under 80CCD(1B) is a genuine bonus for high-income earners.
Frequently Asked Questions
Can I invest in all three simultaneously?
Yes. Many salaried individuals have mandatory EPF through their employer, voluntary PPF for additional guaranteed returns, and NPS for the extra ₹50,000 tax deduction under 80CCD(1B). These are not mutually exclusive.
What happens to EPF when I change jobs?
Your EPF account is linked to your UAN (Universal Account Number), which stays constant across employers. When you join a new company, provide your UAN and the EPF balance transfers automatically or can be manually transferred via the EPFO portal.
Is NPS worth it just for the ₹50,000 tax deduction?
For someone in the 30% bracket, the ₹50,000 deduction saves ₹15,600 in tax (including cess) per year. But the mandatory annuity at maturity means 40% of your corpus generates taxable pension income. Whether it's worth it depends on your other retirement income sources and projected tax bracket at age 60.