Planning your retirement savings is important, especially with longer life spans and rising living costs.
Three popular options in India are the National Pension System (NPS), Public Provident Fund (PPF), and Employees’ Provident Fund (EPF).
Each has different returns, risks, tax benefits, and liquidity features.
Understanding these differences can help you choose the best option—or combination—for your needs.
What Each Scheme Offers
EPF (Employees’ Provident Fund)
Designed for salaried employees in the organized sector, EPF requires contributions from both you and your employer.
Returns are fixed by the government, offering guaranteed savings and tax benefits under Section 80C.
PPF (Public Provident Fund)
Open to all resident Indians, PPF is a long-term savings instrument.
It provides fixed returns, tax-free maturity under the EEE regime, and has a 15-year lock-in (extendable).
It is ideal for conservative savers seeking safety and predictable growth.
NPS (National Pension System)
NPS is a voluntary pension plan open to salaried and self-employed individuals.
It allows investments in equities, bonds, and government securities, offering higher growth potential but also higher risk.
NPS also provides additional tax deductions beyond the standard Section 80C limit.
Key Differences: Returns, Tax, and Liquidity
Returns and Risk
EPF and PPF offer guaranteed returns, providing stability.
NPS allows equity exposure, which can yield higher returns over the long term but with market fluctuations.
EPF is stable, PPF is conservative, and NPS is best suited for long-term growth.
Tax Benefits
All three schemes allow deductions under Section 80C up to ₹1.5 lakh.
NPS adds an extra ₹50,000 deduction under Section 80CCD(1B), making it attractive for higher tax savings.
Liquidity and Lock-in
EPF allows partial withdrawals for medical, education, housing, or marriage needs and full withdrawal at retirement.
PPF permits partial withdrawals after five financial years (effectively from year seven), usually up to 50% of the balance.
NPS is mostly locked until 60, but allows up to three partial withdrawals (25% of your contributions each) after three years for specific purposes.
Eligibility and Contribution Flexibility
EPF is often mandatory for salaried employees, PPF is voluntary for any resident, and NPS covers both salaried and self-employed individuals, offering more flexibility in investment choices.
Which Option Suits You?
EPF: Best for salaried employees seeking a safe, guaranteed base.
PPF: Ideal for conservative investors who want tax-free growth and control over contributions.
NPS: Suitable for long-term investors comfortable with market risks, aiming for higher retirement corpus.
Many experts recommend combining these schemes to balance safety and growth.
EPF/PPF can provide stability, while NPS adds growth potential for the long term.
Conclusion
There is no single “best” option among NPS, PPF, and EPF. Each serves different investor needs:
EPF ensures security for employees.
PPF delivers low-risk, tax-free savings.
NPS offers higher growth potential for patient, long-term investors.
For many, a layered approach using more than one scheme can help build a strong, well-rounded retirement portfolio, aligning each instrument with career stage, risk appetite, and retirement goals.
