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NPS vs PPF
The National Pension Scheme (NPS) and the Public Provident Fund (PPF) are both long-term savings schemes aimed at securing a stable retirement life. While PPF offers fixed returns, NPS provides market-linked returns with higher growth potential. Understand the difference between these two government-backed schemes to choose your ideal investment tool for a financially stable retirement.
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Start Investing ₹10k/Month & Build a corpus of ₹1 Crore# on Retirement
What is the National Pension Scheme (NPS)?
The National Pension Scheme (NPS) is a government-backed retirement plan. Indian citizens aged 18 to 70 are eligible to apply for this scheme. It allows individuals to contribute regularly and build a fund for their retirement. Investors can choose how their contributions are invested, including options like equities and government bonds. While contributing, NPS provides tax benefits under Section 80CCD. Upon retirement,60% of the corpus can be withdrawn tax-free, while 40% must be invested in an annuity to generate a regular pension. It is a common investment option for retirement savings.
NPS Calculator
Your Pension Calculation
Total Investment
Returns Earned
Maturity AmountMaturity Amount split (Lumpsum & Pension)
60%
Lumpsum AmountAt the age of 60 Yrs
40%
Pension WealthAt the age of 60 Yrs
What is the Public Provident Fund (PPF)?
The Public Provident Fund (PPF) is a safe, long-term savings plan backed by the government. It offers a fixed, government-declared interest rate, allowing investors to save money steadily. The investment contribution can begin only from ₹500 and go up to ₹1.5 lakh each year, depending on the individual’s financial capacity. The account has a 15-year lock-in period, making it ideal for building a retirement fund. PPF also offers tax benefits, helping reduce your taxable income under Section 80C.
Difference Between NPS and PPF
The key differences between NPS and PPF are summarised in the table below:
| Parameter | NPS (National Pension Scheme) | PPF (Public Provident Fund) |
| Primary Objective | Retirement-focused pension plan designed to build a post-retirement income corpus | Government-backed long-term savings and retirement scheme |
| Account Options | Tier I (mandatory with limited withdrawal) + Tier II (voluntary with anytime withdrawal flexibility) | One standard account with a 15-year mandatory lock-in |
| Return Structure | Market-linked returns; historically 11%–20% | Fixed 7.1% p.a. (FY 2025–26), compounded annually |
| Exposure to Equity | Equity allocation up to 75% (active or auto choice) | No exposure to equity markets |
| Access to Funds | Tier I restricted until 60 years (partial withdrawals permitted); Tier II fully flexible | Partial withdrawals allowed after 5 years; full withdrawal on maturity (15 years) |
| Tax Benefits on Investment | Section 80CCD deduction (Rs. 1.5 lakh + additional Rs. 50,000) | Section 80C deduction (up to Rs. 1.5 lakh) |
| Tax Treatment on Maturity | 60% lump sum tax-free at retirement; annuity income taxable | Entire maturity proceeds are tax-free |
| Early Withdrawal Rules | Permitted under specific conditions; partial withdrawal allowed | Partial withdrawal after 5 years; otherwise subject to lock-in period |
Invest More Get More
Invest ₹10K/Month YOU GET ₹1.5 LAKHS* MONTHLY PENSION
Invest ₹7K/Month YOU GET ₹1 LAKHS* MONTHLY PENSION
Invest ₹5K/Month YOU GET ₹75 THOUSAND* MONTHLY PENSION
standard T&C Apply *
Tax Benefits: NPS vs PPF
National Pension Scheme (NPS)
You can claim deductions under the following provisions:
- Section 80CCD(1):Deduction up to 10% of salary (or 20% for self-employed) within the ₹1.5 lakh cap of Section 80C.
- Section 80CCD(1B):An additional ₹50,000 deduction exclusively for NPS contributions. This is over and above the ₹1.5 lakh limit.
- Section 80CCD(2):Employer contributions up to 10% (or 14% for government employees) of salary are deductible. This is not subject to the ₹1.5 lakh limit.
Public Provident Fund (PPF)
PPF contributions qualify for deductions under:
- Section 80C:Up to ₹1.5 lakh annually. The interest earned and maturity amount are completely tax-free, making it an EEE (Exempt-Exempt-Exempt) investment.
Final Thoughts
Both NPS and PPF come with distinct advantages, serving different financial needs. Choose NPS if you're looking for long-term market-linked growth and regular post-retirement income. Opt for PPF if your priority is capital safety with tax-free, fixed returns. Invest in both the schemes to diversify your retirement portfolio, maintaining a relatively low-risk balanced approach.
FAQs
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Can I invest in both NPS and PPF simultaneously?
Yes, you can invest in both. Each has separate tax benefits under different sections of the Income Tax Act. -
 Do both NPS and PPF offer online account management?
Yes. NPS offers full online management, including fund switches. Most banks and post offices now provide online access for PPF as well. -
Can NRIs invest in NPS or PPF?
 NRIs can invest in NPS but cannot open a new PPF account. However, existing PPF accounts can continue until maturity. -
Is the maturity amount from both schemes tax-free?
 PPF maturity is fully tax-free. For NPS, 60% of the corpus is tax-free, while the annuity income is taxable per your slab.
Insurers Offering Pension Plans
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or
insurance product offered by an insurer.
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Your Pension Calculation
Total InvestmentReturns EarnedMaturity AmountMaturity Amount split (Lumpsum & Pension)
60%
Lumpsum AmountAt the age of 60 Yrs
40%
Pension WealthAt the age of 60 Yrs
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˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.