Contents
NPS and PPF are two of the most popular retirement options in India. Both offer tax benefits but serve different purposes.
NPS vs PPF: Key Comparison
| Feature | NPS | PPF |
|---|---|---|
| Returns | 9-12% (market-linked) | 7.1% (fixed) |
| Lock-in | Till age 60 | 15 years |
| Risk | Medium (equity up to 75%) | Zero (sovereign) |
| Tax on Maturity | 60% tax-free, 40% annuity | 100% tax-free (EEE) |
| 80C + Extra | 1.5L + 50K 80CCD(1B) | 1.5L only |
| Max Annual | No limit | 1.5 lakh |
When NPS Is Better
- Higher returns with equity allocation (up to 75%)
- Extra 50K deduction under 80CCD(1B) beyond 80C limit
- Employer can contribute (corporate NPS)
- 20+ years to retirement
When PPF Is Better
- Guaranteed returns, zero risk
- 100% tax-free maturity — no annuity requirement
- 15-year lock-in shorter than NPS (age 60)
- EEE status — most tax-efficient
Smartest Strategy: Use Both
Max PPF first (1.5L for guaranteed tax-free base), then NPS for additional 50K under 80CCD(1B).
See our tax guide and retirement guide.
Key Takeaways
- NPS: higher returns, extra 50K tax deduction, equity exposure
- PPF: guaranteed 7.1%, 100% tax-free maturity, zero risk
- Use both: PPF for safety, NPS for growth
- NPS mandatory 40% annuity is a drawback
- PPF EEE status makes it most tax-efficient
FAQ
Can I have both NPS and PPF?
Yes. Max PPF (1.5L under 80C), then use NPS for additional 50K under 80CCD(1B).
What happens to NPS at 60?
Withdraw 60% lump sum (tax-free). Use 40% to buy annuity (taxed as income). Can delay till 75.
