NPS vs PPF: It’s a hard question, in fact. Whenever we think about saving for a Post-Pension Fund, we first and foremost think of the Public Provident Fund (PPF). PPF ensures secure long-term returns and therefore provides a great opportunity for investment in long-term savings throughout all ages. Late though, as a tool in making retirement saving, the National Pension Scheme or NPS also received considerable attention. The use of NPS has increased after Budget 2015-16 when additional tax deductions of Rs. 50,000 have been made available by the government on NPS investments.

What is Public Provident Fund (PPF)?

The Public Provident Fund (PPF), control by the Government of India, is one of the secure options for tax deduction eligible for Section 80C. The sovereign guarantee supports both its main and interest components. The interest rate is assessed on the basis of government bond yields each quarter in the Ministry of Finance. Given the total tax-free interest earned and maturity, PPF delivers one of the highest rates of returns after-tax between all fixed-income investments.

Investments in the Provident Provident Fund are eligible for deductions under Section 80C of the Income Tax Act. Also, investments fall under the Release – Exclusion – Exemption (EEE) category. In other words, investment, interest, and redemption (maturity amount) are all exempt from tax. Investments of up to INR 1,50,000 per annum are eligible for tax exemption under Section 80C of the Income Tax Act.

What is National Pension Scheme (NPS)

Also, name as a national retirement plan is a pension plus investment scheme launched by the Government. It is a voluntary pension plan available to the citizens of India. The NPS is managed by the Regulatory and Development Authority of the Pension Fund (PFRDA) and the central government.

NPS subscribers’ contributions are invested in market-based asset classes such as equities and debt. The NPS returns are thus connected to the market. NPS investment is locked up to the withdrawal.

 Every citizen of the Netherlands can invest in an NPS. In addition, this scheme can be used by all employees (organized and unorganized sectors). It promotes savings and better retirement investments. Under the Income Tax Act section 80C and 80CCD, NPS allows investors to benefit from the tax advantages of investments up to INR 2 lakhs.

Key Differences between NPS vs PPF

Key DifferencesPPFNPS
Who can invest?Any resident of India. A person can open a PPF account in the name of his or her minor children and get tax benefits.An NPS account can be opened for Indian citizens over the age of 18 and under 60 years of age.
Are NRIs allowed for this scheme?No, not allYes
What is the maturity period?The PPF account matures in 15 years. One can also extend this term after 15 years with a five-year block by donating with or without making another contribution. Maturity period is not adjusted.You can contribute to an NPS account for up to 60 years with the option of extending the investment to 70 years.
What is the investment limit?Minimum Rs. 500 annually, at a higher rate set at Rs. 1,50,000. A maximum of 12 donations per year is allowed.The minimum contribution required is Rs. 6,000. There is no limit to the contribution as long as you do not exceed 10% of your salary or 10% of your total income if possible.
What are the tax assistances?All monies made in PPF are deducted under section 80C.In addition, the amount collected and interest is also tax-free at the time of tax deduction and is only available at Rs. 1.5 lakh under Section 80CCD (1) of the Income Tax Act, plus an additional Rs. 50,000 under Section 80CCD (2) – amount up to Rs. 2 lakh
Is premature withdrawal/partial withdrawal allowable?Minor withdrawals are allowed after seven years onwards with certain restrictions. Loans for the third and sixth financial year of account opening are available; but subject to conditionsAfter ten years, account holders are eligible for early withdrawal, partly under certain circumstances. However, to retire before retirement, one must use at least 80% of the corpus collected to purchase life insurance
How do I choose how to invest my money?NoYes, you can choose between stocks, government securities and fixed income instruments, and other government securities.
What are the returns like?The interest rate is determined by the government.The interest rate is linked to the market. The potential return is high.
Do I have to buy an pension?NoOn Maturity, you need to buy a pension that costs at least 40% of the corpus, unless the maturity amount is less than 2 lakh.

Comparison of NPS Vs PPF and retrieval

1) Security

The NPS is not a fixed recovery and is not ‘safe’ in that sense. In a broad sense, however, it is strictly regulated by the PFRDA (Pension Fund Regulatory and Development Authority) and is unlikely to face major challenges arising from fraud / mismanagement.

NPS refunds affect the performance of managers of pension funds, and if you do not satisfy the efficiency of your manager, you can process improvement. The Government of the PPF has a fixed refund. The government is also using PPF funds. It carries virtually no automatic risk because of this.

2) Liquid

PPF has a 15-year term. You can make partial withdrawals after the end of the 6th financial year eg the beginning of the 7th financial year from the year of account opening. However, it is suggested that one should check the relevant bank’s website to determine when partial withdrawals are allowed. Some banks, such as ICICI and Axis, allow withdrawals after 5 years and others after 7 years (SBI and HDFC). The maximum amount that can be released during the financial year is below the following:

  • 50% of the account balance at the end of the financial year, preceding the current year, or
  • 50% of the account balance at the end of the 4th financial year, which precedes the current year.
  • You can also get a loan by comparing the balance in the PPF account from the third to the 6th year after the account is opened. The maximum loan amount that can be obtained from PPF accounts is 25% of the balance at the end of the 2nd financial year preceding the year in which the loan application is made.

NPS matures at 60 but you can extend it until it is 70 years old. You can withdraw up to 25%, three years after opening an account under the ‘partial withdrawal’ center. You can do only 3 such withdrawals from the NPS. You can make withdrawals for reasons such as marriage or higher education for children, by building or buying a house or treatment for diseases such as cancer and kidney failure.

3) Taxes

Investing in a PPF account up to Rs 1.5 lakh per year is taxable under Section 80 C of the Income Tax Act, 1961. PPF interest is also tax-exempt but must be announced in annual tax returns. The maturity value of PPF is also tax-free. In other words, PPF enjoys ‘pardon, pardon, pardon’ tax administration.

Investments in the NPS are tax deductible up to Rs 1.5 lakh under Section 80 C. However, those contributions may not be more than 10% of your income. You can also get additional tax deductions under Section 80 CCD (1B) of the NPS. Refunds to NPS are also tax-free as long as the money is deposited in an HDFC account. At maturity, 40% of the NPS balance can be deducted without tax. Another 40% must be used forcibly to purchase a pension (monthly income). This pension will be taxable. The 20% balance can be deducted after tax or re-used to buy a pension.

4) Retirement Focus

PPF can be used to save for retirement but is not designed specifically for retirement. For example, you can open your PPF account for your young child and this will mature when he or she grows up or starts working. An NPS account can only be opened by a person over the age of 18 and only mature when he or she is 60 years old. In other words, locking an NPS can be too long.

5) Eligibility for the Schemes NPS vs PPF

The provident fund is an Indian resident’s long-term retirement plan except for the NRIs. There are no such distinctions in the national pension system. It is open to all Indians, NRIs included. Anyone in age 18-60 is eligible to participate in NPS.

6) Minimum and Maximum Investment Amounts

In terms of the amounts to invest, there are similarly lower brackets in both the National Pension System and the Public Provident Fund, which is INR 6.000 chargeable within 4-12 times a year at a limit of INR 500. For both schemes, fortunately, the upper brackets vary. For the PPF, INR 100,000 is the highest bracket. There is no such maximum limit to NPS, but tax benefits can be obtained under different sections of NPS for up to INR 100 000 given that the amount of the contribution is within 10% of your total salary.

7) Withdrawal

NPS is a pension-based tool that therefore discourages premature withdrawals. An NPS account is 60 years old but can be extended for another 10 years. Three partial withdrawals from an NPS account are permitted, but only for particular reasons like child education or marriage. It is not possible to withdraw 25% of the corpus and only after three years of investment the facility will become operating.Investment in PPF is 15 years old and can be extended in five-year blocks. Partial withdrawals from a PPF account are allowed only after 5 years after the account has been opened. At the end of financial year, before the current year, the withdrawal amount is capped at 50% of the account balance.

Return of Investment: NPS vs PPF

One of the main reasons why people are looking for pension funds in India is because of the associated profit. Compared between the National Pension System and the Public Provident Fund, the NPS is a high-return car portion of what you have invested in stock trading indicating high returns. 

PPF on the other hand is about consistent restitution and there is no measure of additional frills. Refund Values ​​At the given time PPF has a fixed return on all statistics and any changes are announced ahead of time. How much will you return with the NPS but depends on the performance of the fund manager and the consolidation of the asset class. 

If after a short time, the return in the event of an NPS this may change. Therefore, there is a lot of emphasis on long-term repayment because you have the opportunity to use 50% of the stock prices through the National Pension System. Only 50% of the contributions make this a very safe bet compared to shared funds. When it comes to returns, NPS seems to be a better choice than PPF. 

In any retirement portfolio whether the National Pension System and the Public Provident Fund both have their place and associated benefits. PPF is all about safety cookies in relation to your investment with a strong return on investment.

 On the other hand, there are dual benefits associated with the NPS, which include financial security and investment disclosure. Not surprisingly, there has been a lot of interest in the National Pension System, especially considering the proposed amendments to the system, which the government will implement in the future. 


NPS is a major savings scheme, as you can see. It may not be the best way to invest if you are to save for other purposes as education for children, marriage for daughters, etc. A PPF scores NPS as the best investment scheme for all of these requirements.

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