NPS Vs PPF: Difference, Return Rates & Which is Better
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National Pension Scheme (NPS) and Public Provident Fund (PPF) are retirement savings plans. Retirement planning is a significant process that helps you live a respected and independent life even after retirement. Although these schemes have similar goals, they differ in multiple aspects. If you are caught in the NPS vs PPF debate and cannot decide which one to choose, the following sections can help you make a better decision.

What is NPS?

NPS is a government-back pension scheme open to employees in private, public, and unorganised sectors. Subscribers invest regularly in their NPS account throughout their employment and receive a certain percentage as a lump sum at retirement.

Who Can Invest in NPS?

All Indian citizens aged from 18 to 70 years can invest in the NPS scheme. However, those working in the armed forces, with an unsound mind, or undischarged insolvents are not eligible for the plan. Account holders must comply with the KYC norms to open an NPS account.

What is PPF?

PPF is another government-sponsored scheme popular among people with long investment horizons. It has a minimum lock-in period of 15 years, after which account holders can close the account and withdraw their money. All Indian citizens can invest in a PPF, except HUFs and NRIs. The minimum investment amount is ₹ 500 annually with a maximum of ₹ 1.5 Lakh.

Who Can Invest in PPF?

All Indian citizens between 18 and 70 years old can invest in PPF after complying with the KYC norms. However, the account holders should not have an unsound mind or be undischarged insolvent. NRIs and HUFs are also not eligible to open a PPF account.

Difference between NPS and PPF

Let’s look at the difference between NPS vs PPF:

Parameter PPF NPS

Eligibility for Investment

All Indian residents can open a PPF account, even in the name of their minor children.

All Indian citizens between 18 and 70 years can invest in the NPS scheme.

Eligibility for NRIs



Interest Rates

Lower than NPS

Market linked and definitely Higher than PPF

Maturity Period

PPF account maturity comes in 15 years. However, account holders can extend the term in blocks of 5 years with or without making any more contributions.

There is no fixed maturity period. You can contribute to the account until you are 60 years old and extend it up to the age of 75 years.

Investment Limit

Minimum investment of ₹ 500 annually with a maximum capping of ₹ 1.5 Lakh. However, you cannot make more than 12 contributions in a year.

The minimum contribution requirement is ₹ 1,000. There are no maximum limits to the contribution, though it should not exceed 10% of your Basic+D.A with monetary capping of Rs. 750000 in FY and 20% of your gross total income if you are self-employed.

Partial or Pre-Mature Withdrawal

Partial withdrawals are allowed after 7th year of account opening with some limitations and conditions. After fulfilling certain conditions, you may also obtain a loan on your available balance.

Account holders become eligible for early or partial withdrawal after ten years of opening the account. However, you must invest at least 80% of the corpus in an annuity which will yield lifelong pension.

Choice of Investment Options

No option

You can choose to invest between 10 Pension fund managers and also change it anytime with different allocation in equity funds, fixed-income instruments, or government security funds.

Annuity Benefits

Default 33% is commuted to an annuity plan.

At retirement, you receive 60% of the corpus in a lump sum and invest the remaining 40% in annuity to receive a regular income.


As decided by the government

Returns linked to the market usually offer higher returns.

Tax Benefits

PPF deposits are tax-deductible under Section 80C. Accumulated amounts and interest are also tax-exempt at withdrawal.

Only ₹ 1.5 Lakh is eligible for tax benefits under Section 80CCD (1), and an additional tax benefit of ₹ 50,000 under Section 80CCD (2), totalling up to ₹ 2 Lakh.


Return Rates: NPS vs PPF

Return Factors PPF NPS
Return Rate Fixed, set by government quarterly Market-linked based on fund performance
Return Details 8% in 2008, 8.7% in 2015, 7.1% since April 2021 Equity Asset Class: 18.61% (last year), 16.58% (3 years), 16.58% (5 years)
Risk Factors Safer investment due to government sponsorship and guaranteed returns Returns may fluctuate based on underlying asset performance; Market-linked investment


PPF has a fixed return rate that the government decides. The government sets the exact PPF rate every quarter. For instance, it was 8% in 2008, 8.7% in 2015, and 7.1% since April 2021. On the other hand, NPS returns are market-linked based on the performance of the NPS funds. For instance, Kotak Mahindra Pension Fund Ltd. gave a return of 18.61% in the last year for equity asset class, 16.58% in for 3 years returns for equity asset class, and 16.58% for equity asset class for 5 years.

Regarding the risk factors, PPFs are safer investment options because of their government sponsorship and guaranteed returns. However, NPS investments are market-linked, and their returns may fluctuate according to their underlying asset’s performance. Hence, if you are looking for low but guaranteed returns, opt for a PPF account.

NPS vs PPF: Comparison for Making Decisions Better

Criteria NPS PPF
Investment Horizon Longer term Shorter term
Expected Returns Higher Guaranteed
Factors Influencing Choice Age, risk tolerance, investment horizon Individual financial goals
Tax Benefits Maximum benefit up to ₹2 Lakh All deposits (principal and interest) tax-deductible under Section 80C, capped at ₹150,000 for the fiscal year


After understanding the differences between NPS vs PPF, you can choose between the two based on your individual financial goals. If you expected guaranteed returns with shorter investment horizons, opt for a PPF. However, if you are ready to stay invested for a longer term and expect higher returns, go for an NPS investment scheme. Based on your age, risk tolerance, and investment horizon, you can open an NPS or PPF account to achieve your financial goals and support long-term growth. When it comes to tax implications, an NPS offers a maximum tax benefit of up to ₹ 2 Lakh. However, all PPF deposits, including principal and interest, are tax-deductible under Section 80C capped at 150,000 for the FY.

Frequently Asked Questions (FAQs)

Q: Is it better to invest in PPF or NPS?

Whether you choose PPF or NPS for investment depends on your financial goals, risk appetite, and investment horizon. While PPF offers low but guaranteed returns, NPS offers higher returns based on the market conditions.

Q: Which is better, NPS or provident fund?

The final decision depends on the returns you expect and the risk you can take for your investment.

Q: Which investment is better than NPS?

PPF can be a better investment than NPS if you want a government-backed program with guaranteed returns and a shorter investment horizon.

Q: Which scheme is better than PPF?

NPS can be a better investment scheme than PPF if you seek higher returns and regular income after retirement.

Q: What are the disadvantages of PPF?

Lower returns, smaller investment limits, and shorter time horizons are some major disadvantages of PPF.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.