When planning for retirement, choosing the right investment scheme can significantly impact the size of your final corpus. In India, three of the most trusted and widely used retirement savings options are the National Pension System (NPS), Employees’ Provident Fund (EPF), and Public Provident Fund (PPF).
Each scheme comes with its own set of features, tax benefits, and returns. But if you’re investing ₹1.5 lakh annually, which of these three can help you build the largest retirement corpus over time?
Let’s compare NPS, EPF, and PPF in terms of structure, tax savings, returns, liquidity, and long-term gains.
Understanding the Basics
National Pension System (NPS)
NPS is a government-regulated pension scheme managed by the Pension Fund Regulatory and Development Authority (PFRDA). It allows you to invest in a mix of equities, government bonds, and corporate debt, offering flexible asset allocation and higher return potential. NPS is ideal for those comfortable with some market-linked risk.
Employees’ Provident Fund (EPF)
EPF is a compulsory retirement savings scheme for salaried employees. Both the employee and employer contribute a fixed percentage of the salary every month. The fund earns interest at a rate declared annually by the government, making it a low-risk option with predictable growth.
Public Provident Fund (PPF)
PPF is a long-term savings option backed by the Government of India. It comes with a lock-in period of 15 years and offers a fixed interest rate, updated quarterly. PPF is popular among conservative investors seeking stability and tax-free returns.
Tax Benefits Compared
NPS:
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Deduction up to ₹1.5 lakh under Section 80C
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Additional ₹50,000 deduction under Section 80CCD(1B)
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At retirement, 60% of the corpus is tax-free, and 40% must be used to purchase an annuity, which is taxable
EPF:
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Eligible for deduction under Section 80C
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Interest earned and maturity amount are tax-free after five years of continuous service
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Offers Exempt-Exempt-Exempt (EEE) tax status under certain conditions
PPF:
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Entire investment qualifies for deduction under Section 80C
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Interest and maturity amount are completely tax-free
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Also follows the EEE tax regime
Returns and Risk Profile
NPS:
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Average returns range from 9% to 12%, depending on asset allocation and market conditions
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Higher return potential due to equity exposure, but carries some market risk
EPF:
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Offers stable returns around 8.25% annually
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Low risk, backed by government guarantees
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Suitable for long-term financial safety
PPF:
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Offers a fixed interest rate, currently at 7.1% (compounded annually)
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Completely risk-free
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Best suited for conservative investors
Liquidity and Withdrawal Rules
NPS:
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Partial withdrawals (up to 25% of contributions) allowed after three years for specific purposes
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Full withdrawal available at age 60
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60% of the corpus can be withdrawn tax-free; the rest goes into an annuity
EPF:
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Partial withdrawals permitted for marriage, medical emergencies, education, and home purchase
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Full withdrawal allowed at retirement or after two months of unemployment
PPF:
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Partial withdrawals allowed after the seventh financial year
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Loans available against the balance from the third financial year
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Full withdrawal only after 15 years
Corpus Comparison with ₹1.5 Lakh Annual Investment Over 35 Years
Assuming no change in interest rates and consistent contributions:
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NPS (10% average return): ₹4.47 crore
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EPF (8.25% fixed return): ₹3.06 crore
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PPF (7.1% fixed return): ₹2.79 crore
These estimates are based on compounded annual returns and may vary with changes in policy rates or market performance.
Expert Insight
Financial experts often recommend a diversified approach rather than relying on a single investment avenue. NPS is suitable for investors seeking higher returns and comfortable with some market volatility. EPF and PPF, on the other hand, are better for risk-averse individuals who prefer guaranteed returns and capital protection.
Combining these schemes can help balance growth, stability, and tax efficiency — all key to building a secure retirement corpus.
Disclaimer: This article is for informational purposes only. Always consult a certified financial advisor before making investment decisions.
