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NPS vs PPF – Which Retirement Plan is Best?

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Whenever we think about our post retirement life, the first thing that comes to our mind is Retirement Planning. Life after retirement is very important for us because at that time we want to remain independent without being dependent on anyone. In today’s time, we have to do our retirement planning better due to increasing life expectancy and inflation.

NPS vs PPF - Which Retirement Plan is Best credityatra


NPS and PPF are one of the best retirement savings plans in the present times. But will you be able to decide which retirement savings scheme is best for you?

Choosing between NPS vs PPF can be a daunting task. But today through this article we will explain to you the difference between PPF vs NPS in very easy language so that you will be able to decide which plan you should go with.

Difference Between NPS vs PPF

Basis Of The Difference



Eligibility Anyone in the age group of 18-65 – Indian Citizen or NRI Any Indian Citizen / HUF not eligible
Citizen or NRI Rs 500 per annum Rs 500 per annum
Minimum investment No limit Rs 1,50,000
Lock-in-period Up to the age of 60 15 years
Dependency of returns Dependent on market performance Guaranteed Returns Determined on Quarterly Basis
Expected Returns 8-10% 7.1% (as on Dec 2020)
Can you determine where your money will go? Yes, (Equity, Debt, Govt Bonds, AI) No
Tax benefits Exempt (Annuity is taxable) Exempt 
Extension of investment 10 year extension just 1 time Can be extended any number of times in a block of 5 years
Loan facility Not available Available between 3rd to 6th year
Pension facility Available after 60 years of age Not available
Expenses Ratio 0.01% 0
Risk Low risk No risk
Employer Contribution Maybe No
Can it be attached by the court in the form of Debt? Yes No

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NPS vs PPF Difference Analysis in Detail

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1- Risk

The money deposited in NPS is mainly invested in four types of asset classes-

  • Equity
  • Government bonds
  • Corporate bonds
  • Alternative investment

The returns of all these vary according to the market. In which there is always uncertainty of returns. Still, NPS can easily generate returns close to 10% in the long run. Fund managers are there to invest your money at the right place.

In terms of safety also, the money deposited by the investor in NPS is completely safe which is operated by PFRDA.

Whereas there is no uncertainty of returns in PPF. PPF earns interest at a fixed rate which is announced by the Government of India every quarter.

If you do not want risk at all, then you can take the PPF scheme. If you are thinking of earning good returns by taking a little risk then you should go towards NPS Scheme.

2- Returns

Talking about returns, the return of PPF is around 8%.

Returns due to equity investment in NPS can be 8 to 10% or even slightly higher. Its return depends on your asset allocation. It is worth noting here that only a maximum of 75% can be invested in equities in NPS.

If you do not want to compromise with returns then you should opt for NPS. Otherwise you can opt for PPF.

3- Liquidity and lock-in-period

Your money in PPF is locked-in for 15 years. If you need some amount in the middle then you can withdraw some amount from the beginning of 7th year. The maximum withdrawal amount whichever is less of these two will be –

  • 50% balance of the PPF account from the current year to the end of the previous financial year (F/Y), or
  • 50% of the existing PPF balance at the end of the fourth financial year.

Maturity in NPS happens only at the age of 60 years of the investor. Partial withdrawal in NPS can be done only a maximum of 3 times. You can get premature withdrawal up to 25% of your own investment. But you should have completed 3 years of opening your NPS account for premature withdrawal.

4- Maturity or Withdrawal

At the end of 15 years in the PPF account, you can get your entire deposit money transferred in cash or bank account at once.

But this is not the case in NPS. You can withdraw up to 60% of the amount in NPS. For the remaining 40%, you have to buy an annuity plan. Your monthly pension starts from this annuity plan.

5- Retirement Focus

Talking about retirement funds, NPS is primarily a retirement planning scheme. Even in NPS, a fixed monthly pension is also received from the age of 60 years.

But the purpose of PPF is not to provide any retirement benefit.

For example, a PPF account should be opened for a child below the age of 10 years. In this situation, his PPF account will mature only at the age of less than 25 years. With this, the question of retirement planning does not arise.

Therefore, if you mainly want to raise retirement funds as well as get a pension, then you should choose the NPS scheme.

NPS vs PPF – Which is better

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Now as a conclusion here, if you have to choose between NPS and PPF, which one will you choose?

Our reasoning in this is that if you want to accumulate funds primarily under retirement planning, then you should opt for the NPS scheme. Never opt for NPS scheme for tax planning or benefits. Because apart from NPS, there are many other schemes that will give you tax benefits in less lock-in-period, in which ELSS, PPF, FD are prominent.

Also read: Looking for investment? Here are Best Investment Plans With High Returns 2021

But if your main objective is to earn good returns in a short period of time without any risk, then you should turn to PPF scheme. There is zero risk in PPF scheme and PPF account matures in 15 years. In this you do not need to wait till the age of 60 at all.

But still if you are not able to choose one of the two schemes, then you can invest in both NPS and PPF schemes together. This will diversify your portfolio and enable you to enjoy the benefits of both the schemes.

NPS and PPF Returns

According to the returns also, NPS scheme gives better returns than PPF. Let us understand it with the help of an example.

Ajay’s scheme (age 25 years) Vijay’s Scheme (age 25 years)
Contribution per month Rs 12,500 Rs 12,500
Investment in 35 years Rs 52.5 lakh Rs 52.5 lakh
Rate of Return (assumed) 10% 8%
Maturity Amount Rs 4.8 crore Rs 2.9 crore

Here we have assumed that Vijay has extended the PPF account up to 60 years. You can see here that there is a difference of about 2 crores in maturity amount of NPS and PPF. Now decide for yourself which savings scheme you want to invest in.

Similarities Between NPS and PPF

NPS and PPF have many differences as well as some similarities.

Parameters NPS PPF
Tax benefits
Retirement savings
Long lock-in period
No tax on profits
No tax on maturity amount


We have explained here in all different situations, which plan is better for you! You can choose between NPS and PPF as per your requirement. Hope you have understood NPS vs PPF. If you have any question related to NPS and PPF difference then you can ask us through comment box.

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