Tax & Savings
Contents
NPS vs PPF
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Equity-linked NPS Tier-1 vs guaranteed-return PPF — two pillars of retirement savings, compared directly.
Visual Comparison
Key Differences
| Feature | NPS | PPF |
|---|---|---|
| Return | 8–10% (equity allocation) | 7.1% (guaranteed) |
| Risk | Market-linked (40–75% equity allowed) | Zero risk |
| Lock-in | Until age 60 | 15 years (extendable) |
| Withdrawal | 60% lump sum, 40% annuity at 60 | Fully withdrawable at maturity |
| Extra 80C benefit | Additional ₹50,000 under 80CCD(1B) | Within ₹1.5L 80C limit only |
When to Choose Which
Choose NPS
- Want extra ₹50,000 deduction (80CCD(1B))
- Salary > ₹10 lakh — maximising all deductions
- Willing to buy annuity at retirement
- Employer offers NPS (additional 80CCD(2) benefit)
Choose PPF
- Want full control of corpus at maturity
- Don’t want to buy annuity
- Risk-averse long-term investor
- Short to medium horizon (< 60 years exit)
Frequently Asked Questions
NPS can deliver higher returns due to equity exposure and offers an additional ₹50,000 deduction (80CCD(1B)). PPF is risk-free and fully liquid at maturity. Both complement each other.
At retirement, at least 40% of NPS corpus must be used to purchase an annuity (monthly pension). The remaining 60% is tax-free lump sum.
NPS offers three asset classes: E (equity), C (corporate bonds), G (government bonds). You can allocate up to 75% in equity in Active choice.
Partial withdrawal allowed after 3 years for specific purposes (education, medical, home). Full premature exit: 20% lump sum, 80% annuity.
Both ideally — PPF for guaranteed safe corpus and NPS for equity-linked growth + extra tax deduction. Together they form a strong retirement base.