PPF Vs NPS- Which is better for Retirement?


Public Provident Fund (PPF) and National Pension Scheme (NPS) are  both Central Govt. investment schemes. While starting the investment, it is a constant tug of war in mind for PPF vs NPS. 

However, PPF Vs NPS, Which is better on the given parameter. PPF is a guaranteed return product whereas NPS returns are market linked and are not fixed.

Let’s evaluate which one is better.

PPF Vs NPS – Which is better for Retirement?

Before knowing which one is better for retirement? Let’s first know a bit about both the products.

What is PPF?

 PPF, Public Provident fund is a Central Govt. 15 year scheme. One has to compulsorily deposit a minimum Rs 500 per year to continue the account. The account matures after 15 years.

The maximum Contribution in a Financial year is Rs 1.5 lac. The current interest rate is 7.1% per annum.

Read more about PPF

Public Provident Fund (PPF)-Features And Benefits || PPF Account Benefits 2022

Public Provident Fund (PPF) Withdrawal Rules 2020

PPF Extension Rules- Can I Extend PPF Account After Maturity?

PPF Vs Mutual Fund -Which One Is Better (Detailed Comparison)

Top 10 PPF Account Benefits-You Must KNOW

What is NPS?

NPS or National pension Scheme is a Central Govt. Of India Retirement scheme. Here, One has to compulsorily contribute a minimum Rs 6000 to continue the account. The account matures at the age 60, but it can be extended and contribution can be given till age 70 years.

The maximum Contribution is 2 lac in a Financial year.

Read More about NPS

National Pension Scheme(NPS)- All You Need To Know From Entry To Exit Rules

Latest NPS Withdrawal Rules 2022- Govt. & Corporates

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Basic Difference between PPF Vs NPS

Who can invest?Any Indian Citizen can invest. One can also invest in minor nameAny Indian/NRI above age 18 and less than 60 can open the account
NRI InvestmentNANRI can invest in NPS
Minimum Contribution in a Financial YearMinimum Rs 500Minimum Rs 6000
Maximum Contribution in a Financial YearMaximum Rs 1.5 lac There is no maximum limit but should not exceed 10% of basic and DA or 10% of gross total income
Maturity periodPPF account matures in 15 years. It can be extended for 5 year period with or without making future contributionNo fixed maturity date.One can contribute till age 60, but NPS contribution can be extended till age 70 years.
PPF vs NPS – Basic Difference

Also Read: Latest Post Office Interest Rates July -Sep 2022

PPF and NPS -Type of Scheme

Interest RateCurrent 7.1%Interest rate is guaranteed but changes as per RBI notificationsMarket linked return
SafetySafeReturns are variable
Return Expectation one can take from the product7%-9%7%-12%
PensionNo pension is provided. After maturity, entire amount can be withdrawnCompulsory buy Annuity/ pension plan from life insurance company ( From 40% amount). One can withdraw rest 60%

Tax Benefit

Tax benefit U/S 80 CThe amount of 1.5 lac get tax deduction U/S 80 CThe amount of 1.5 lac get tax deduction U/S 80 CCD(1)
Additional 50000 tax deduction U/S 80CCD ( 1B)
One can get 2 lac deduction under NPS
Maturity TaxationThe entire amount is tax free in nature.20% corpus amount is taxable in nature
PPF and NPS – Tax benefit

Premature Withdrawal

Premature closure and withdrawal is important from an investor point of view. However, the closure of NPS or PPF is not possible in between.

However, Premature withdrawal is permitted under special circumstances.

Premature WithdrawalAfter the seventh year, partial withdrawals are permitted with some restrictions. Loans are possible between the third and sixth fiscal years following account opening, although there are restrictions.Account holders can withdraw money early and partially in certain situations after ten years. However, in order to leave the market before retirement, at least 80% of the earned corpus must be used to purchase a life insurance annuity.
Can I choose where to investNoYes, One can choose from the 4 options equity, Corporate bonds, Govt. securities and alternative investments
PPF or NPS – Premature withdrawal

Interest rate

FeaturePPF NPS 
Interest RateThe current rate is 7.1%Interest rate is not fixed. Since NPS is a market linked product the interest is variable in nature.
What you can expect PPF interest rate is guaranteed but changes time to time as per RBI guidelines.Since NPS is a market linked product, one can expect higher return than PPF
NPS Vs PPF – Interest Rate


Can we take NPS and PPF Both?

Investment in both NPS and PPF is possible. One can invest in PPF for fixed returns and simultaneous

investment in NPS for market linked returns.

Can I invest 1.5 lac in PPF and 50K in NPS?

Yes, one can claim a deduction of 1.5 lac U/S 80C in PPF and can make additional investment of 50K in NPS and claim a deduction U/S 80CCD(1B).

PPF Vs NPS- which is a better option for retirement?

PPF and NPS both provide a fair amount of safety. PPF provides safe returns whereas NPS provides market linked variable returns. Which one will be better for retirement depends on personal risk appetite and financial circumstances and retirement goals.


PPF is a good choice for risk averse investors since it provides safe and secure return for a long duration. One can link various life goal such as Retirement, kids education, wedding or other with PPF. 

Whereas NPS is a purely retirement scheme with market linked returns. One has to compulsorily invest till retirement. Since it is a market linked product one can expect a higher return than PPF. Additionally You can save additional tax deduction for Rs 50K apart from 1.5 lac deduction U/S 80 C.

Read more about How to plan Retirement in India

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