While EPF and PPF are government-backed schemes and give stable returns, NPS invests money in market-linked funds, which can offer higher returns but also come with some market risk.
What is NPS?
National Pension System (NPS) is a retirement savings scheme where money is invested in different asset classes such as equity and government securities. NPS returns are not fixed and depend on market performance.
Any eligible Indian citizen can invest in NPS. The minimum contribution for a Tier 1 account is ₹1,000, while there is no maximum investment limit.
NPS is designed mainly for retirement planning. You can withdraw your investment after reaching 60 years of age. However, if you want to withdraw before retirement, then only 20% of the total accumulated amount can be withdrawn, as per rules.
NPS also provides tax benefits. Apart from the ₹1.5 lakh deduction under Section 80C, investors can claim an additional deduction of ₹50,000 under Section 80CCD(1B).
What is EPF?
Employees’ Provident Fund (EPF) is a retirement savings scheme mainly available for salaried employees. Under EPF, both the employee and employer contribute towards the fund every month.
An employee contributes 12% of their basic salary and dearness allowance towards EPF, and the employer also makes an equal contribution. The interest rate on EPF is decided by the government every year. For FY 2024-25, the EPF interest rate was fixed at 8.25%.
It is considered a safe option because it is backed by the government. The money is generally available after retirement, although partial withdrawals are allowed under specific conditions such as medical emergencies, marriage, education or buying a house.
EPF contributions also offer tax benefits. Investments up to ₹1.5 lakh qualify for deduction under Section 80C, while interest earned and the maturity amount are tax-free if certain conditions are met.
What is PPF?
Public Provident Fund (PPF) is a long-term savings scheme that can be opened by those who are looking for a safe investment option. Unlike EPF, PPF is not limited to salaried employees and can be opened by any Indian citizen.
Investors can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh in a financial year. The interest rate on PPF is reviewed by the government every quarter. The current PPF interest rate is 7.1% for Q2 FY 2025-26. PPF comes with a 15-year maturity period. Partial withdrawals are allowed after completion of 5 or 7 years under specific conditions.
Like EPF, PPF also provides tax benefits. Contributions up to ₹1.5 lakh are eligible for deduction under Section 80C, and the interest earned and maturity amount are tax-free.
NPS vs EPF vs PPF
EPF is suitable for salaried employees looking for stable returns and PPF is ideal for those who want a safe government-backed investment with tax benefits. NPS is a better option for those ready to take some risk to earn higher returns in the long run.
