NPS and PPF are both long-term, government-regulated savings options popular for retirement. They work very differently, though, and many people use both.
Side-by-side comparison
| PPF | NPS | |
|---|---|---|
| Returns | Fixed by government (7.1% for a long time) | Market-linked (mix of equity and debt) |
| Risk | Practically none | Moderate; depends on equity share |
| Lock-in | 15 years (extendable in 5-year blocks) | Until age 60 (limited early exits) |
| Tax on deposits | 80C up to ₹1.5 lakh (old regime) | 80C + extra ₹50,000 under 80CCD(1B) (old regime); employer contribution deductible under 80CCD(2), also in the new regime |
| At maturity | Whole amount, fully tax-free | Part can be withdrawn as a tax-free lump sum; the rest must buy an annuity (pension) whose income is taxable. Exit rules are set by PFRDA and have been revised — check the current limits |
| Best for | Safe, tax-free base | Long-term growth and extra tax saving |
A 25-year example
Investing ₹1.5 lakh a year for 25 years (₹37,50,000 in total):
| Option | Assumed return | Value after 25 years |
|---|---|---|
| PPF | 7.1% | ₹1,03,08,015 |
| NPS (balanced equity mix) | 10% (not guaranteed) | ₹1,62,27,265 |
Illustrative. NPS returns depend on markets and your chosen allocation; PPF rates are revised by the government.
NPS may build a larger corpus, but part of it must be used to buy an annuity at retirement, as per PFRDA's exit rules at that time. PPF gives you the whole amount, tax-free, with complete certainty.
Which should you choose?
- Choose PPF if you want guaranteed, tax-free money and flexibility after 15 years.
- Add NPS if you're in the old regime and want the extra ₹50,000 deduction, or if your employer offers NPS contributions (deductible even in the new regime).
- Use both along with equity mutual funds for a balanced retirement plan.
Estimate how much you need with the retirement calculator and project your PPF with the PPF calculator.