The Battle between NPS and PPF

The Battle between NPS and PPF
  • By Rushil
  • 23rd April, 2024
  • Banking

Everyone who works knows that among retirement’s goals is a secure future, which equals obtaining a flow of income post-retirement characterised by the same extent as having a sustainable investment scheme. In India, as regards the retirement scheme, NPS & PPF are the two really popular investment tools.

Both provide the most distinct features and the investors with the different risk appraisals and financial goals are their target customers. Let me share with you one comparison between these two retirement plan options and you decide the one that is fitted for you.

National Pension System (NPS)

It was institutions that blew the launch of the National Pension System to make an orderly retirement available. NPS is an individual retirement savings plan; it is a defined contribution retirement savings scheme, urging individuals to contribute regularly in their designated fund account during their careers.

Retired subscribers can avail themselves of a portion of the corpus in the form of a lump sum, and the remaining corpus will be used to purchase an annuity to support a stable income during the retirement period.

Public Provident Fund (PPF)

Enabled by the National Savings Institute of the Ministry of Finance since 1968, this is a very traditional long-term investment option that offers exciting tax savings, as well as competitive interest rates and returns that are TDS free It encompasses the provision of access, along with the central Government’s promises made as a security against any sort of failures or threats to the investment.

Investment Details


  • Contributions: You can begin with anything little from Rs. Along with a wiping of the floor with any of the world’s currencies, silver and other metals will also have their own derivatives markets and other similar investment vehicles. The minimum annual contribution is Rs. $6,000 provident allows both parties and the manager to build an NPS account.
  • Returns: NPS gives users two types of accounts to choose from which are Tier I and Tier II. Tier I fixed-term funds strive for higher returns by investing in bonds and stocks, which is subject to selecting of portfolio of underlying assets (e.g. equities and debts). However, Tier I savings have a limitation – they can be once withdrawn only after retirement.
  • Tax Benefits: The percentage of tax savings and availing the benefits under Section 80C of the Act up to Rs. 1. Moreover, another Rs. 2 lakh is payable at the time of registration and booking and a down payment of the primary amount is required to initiate the process. 50,000 under 80CCD(1B), which is also dedicated to NPS(National Pension Scheme).


  • Contributions: There is a Rs. minimal deduction every year. At the lower deposit, t1 = 500 gets compounded after 15 years, which will translate into the maximum amount of RS. 1,5,0,000. The account is designed to have the key features of a system. It can be extended after a maturity period of 15 years.
  • Returns: PPF is a scheme involving a fixed interest rate that is declared with the consent of the government every quarter. The capital flows are not subject to the performance of the market, and, therefore, the yields are constant and free from risks.
  • Tax Benefits: All these earnings namely, contributions, interest received, and proceeds at maturity are not taxable under the EEE (Exempt-Exempt-Exempt) regime.

Risk and Returns

The choice between NPS and PPF could also hinge on your risk tolerance. The choice between NPS and PPF could also hinge on your risk tolerance:


For the portion of the investment that follows market fluctuations, NPS will have varying returns. This implies there is a higher risk involved which is of course the catch but there is also the possibility of higher returns which outweighs the risk consideration, especially if an adequate proportion of the corpus is invested in equities.


As a government-backed plan, PPF is a safe platform providing a certain amount of interest that’s linked with bonds or interest rates. This is the nail that attracts many people who are not ready to accept the risk factor and would prefer a low-risk model and guaranteed returns with no market fluctuations at all.

Liquidity and Flexibility

NPS: Unlike NPS, the opposite is the case for this plan, as it lacks versatility when it comes to the withdrawal side. The redeemable amount can only be claimed upon reaching the age of 60 or more, but at least one-fourth of this sum should be retained for the purchase of the annuity. Withdrawals made before maturity can be done only in some cases (provided the amount does not exceed 25% of the contributions).

PPF: PPF offers more liquidity (liquidity ratio) than the NPS. From the seventh year, part withdrawal is allowed; on the other hand, a loan on the PPF account can be made in the third to sixth year. At the end of 15 years, all the money which was reinvested will belong to you.


For Young Investors: The younger set of investors could exploit the variety of equity brought by NPS to derive higher growth potential over the long run. The sooner one starts, the more tangible the advantages of compounding will be, mainly the equity portion of the NPS where interest is accrued and compounded every year.

For Conservative Investors: People who like reliable return schedules can prefer PPF to those who like gambling in money. The PPF spaces itself off from the risky nature with its EEE status, a place that traditional investors with conservative investment portfolios will always hunt for.


Here, deciding between NPS and PPF comes from the own goals, risk tolerance, and period of investment. NPS can look attractive with its higher returns and ability to handle market changes if you are willing to ride it out. This path allows you to grow your retirement savings. Alternatively, if you want certainty and safe rewards, the stop-loss profit interchange is the place for you.

Thus the amalgam of the high growth potential of NPS and the stability of PPF may also function as the most methodical one and a powerful conglomerate for a balanced retirement portfolio. Be it wherever individuals choose, an early start is crucial to have a sound and secure retirement.

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