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NPS vs PPF: Which is better?


Between NPS and PPF, which investment would you pick up for your retirement savings?

NPS? PPF? Both? Neither?

You may ask, why only NPS and PPF? That is a fair question. After all, PPF and NPS are not the only retirement products available. For your retirement, you can invest in stocks, mutual funds, EPF, NPS, PPF, Fixed deposits, pension plans, insurance plans, and many more products.

However, if PPF and NPS were the only two options available to you, which would you pick up?

In such a case, you would want to compare these products on various aspects: Returns, volatility, tax benefits, tax treatment on maturity, flexibility etc. And then you choose from various investment options based on your preferences and suitability.

Remember it is NOT an either-or decision. If you believe both products fit with your financial planning needs, you can use both.

In this post, let us compare NPS and PPF on various parameters.

What are NPS and PPF?

NPS is a proper retirement product. NPS has been specifically designed to provide pension in your retirement years. You contribute to NPS while you are working. Your investment earns returns until you exit NPS at time of retirement (superannuation) or after turning 60 (or later).

It is a defined contribution pension plan i.e., your contribution is defined or under your control. The pension (or annuity) that you get in your retirement is not fixed. It will depend on the accumulated corpus, the amount converted to annuity, and the prevailing annuity rate.

PPF (Public Provident Fund) has been a traditional favourite for retirement savings. Backed by the Government, it carries no risk. The Government announces the interest rate every quarter.

In this post, I shall compare PPF and NPS on various parameters. You must decide which is a better product for you.


1. Tax Treatment of NPS vs. PPF

PPF is an EEE product. You get tax benefit for investment, interest earned is exempt from tax, and the maturity amount is also tax-free. You get tax-benefit of up to Rs 1.5 lacs per annum for investment under Section 80C of the Income Tax Act.

Note: The benefit on investment in PPF is available only under the old tax regime. If you file returns under the NEW tax regime, you do not get tax benefit on investment in PPF.

On the tax front, NPS is not too far behind PPF now. It is almost EEE. Well, almost.

You get tax benefits for investment.

  1. Own Contribution: Under Section 80CCD(1B). Up to 10% of salary. 20% of income for self-employed. Capped at Rs 1.5 lacs per annum. Subsumed under Section 80C.
  2. Own Contribution: Up to Rs 50,000 per annum under Section 80CCD(1B).
  3. Employer contribution: Up to 10% of Salary (14% for Government employees) under Section 80CCD(2). This is capped at Rs 7.5 lacs per annum. This is the cumulative cap for employer contribution to EPF, NPS, and superannuation accounts.

Benefits (1) and (2) are available only under the Old tax regime. Not under the New tax regime. Benefit (3) for employer contribution is available under both Old and New tax regimes.

Returns are exempt from tax. There is no liability until you exit from NPS.

At maturity (exit from NPS), you can withdraw up to 60% of accumulated amount as lumpsum and must use the remaining (at least 40%) to purchase an annuity plan. The entire lumpsum withdrawal is exempt from tax. The amount that is used to purchase the annuity plan is also not taxed. However, annuity income from such an annuity plan is taxed in the year of receipt.

2. Liquidity (Withdrawal and Exit options)

PPF scores over NPS on this front.

PPF provides the option of loans from the 3rd year and partial withdrawals from the 7th year. PPF becomes very flexible once you complete initial maturity of 15 years.

NPS has very rigid exit and partial withdrawal rules. NPS is meant to be run till retirement. If you exit before retirement, there is a mandatory purchase of an annuity for 80% of the accumulated corpus. Limited partial withdrawals are permitted after a few years.

3. Mandatory Purchase of Annuity

With NPS, at least 40% of the accumulated amount must be used to purchase an annuity plan. If you exit before superannuation or the age of 60, at least 80% must be used to purchase an annuity plan.

Under PPF, there is no such restriction.

Clearly, PPF is a winner on the flexibility front.

However, is mandatory purchase of annuity such a bad thing? Many finance experts argue that the subscribers should be allowed to use the accumulated NPS corpus as they wish. I do not fully agree with such an argument.

Yes, greater flexibility is always desirable. However, NPS is a pension product. You cannot take out pension from a pension product. Mandatory annuity provision ensures that at least a portion of the accumulated corpus is utilized towards providing steady income to the investor. Annuities can add a lot of value to a retirement portfolio, if you buy the right variant at the right age.

By the way, do you know that you can even use PPF as a pension tool? Not through the customary way of buying an annuity plan, but you can smartly use your PPF account to generate tax-free income during retirement.

4. Maximum Investment Amount (PPF vs. NPS)

You cannot invest more than Rs 1.5 lacs in PPF per financial year. This cap includes your own PPF account and all those PPF accounts where you are the guardian.

With this cap on annual investment, if you want to accumulate a big corpus in PPF for retirement, you must keep investing patiently for years. You cannot suddenly discover the merits of PPF and build a big portfolio there.

There is no cap on investment in NPS.

NPS scores over PPF on this front.

Read: How you and your spouse can contribute more than Rs 1.5 lacs in PPF accounts?

5. Returns (NPS vs PPF)

PPF is a pure debt product. The interest rate is announced by the Ministry of Finance every quarter. The Govt. can announce a different return every quarter. PPF provides a good rate of return for a fixed income product. And that too tax-free returns.

Currently, PPF is the only EEE debt investment. Even EPF returns have become taxable under certain conditions.

On the other hand, NPS is a hybrid product, where your money is split between equity (E) and debt funds (C and G). If you opt for Active choice, you decide the split across the 3 funds.

If you opt for Auto-choice, the allocation is decide based on a pre-set asset allocation table.  You can even make it a pure debt product. However, equity exposure is capped at 50% 75%. Returns are market-linked.

With equity exposure, if the Indian economy were to do well over the long term, I would expect NPS to provide better returns than PPF over the long term (on pre-tax basis). No guarantees though.

For post-tax returns, it depends on if and how well you can reduce your tax outgo in the case of NPS.

Which is better? PPF or NPS

I like PPF more than NPS.

Am I biased? Yes. I do not deny my bias.

But I invest in both NPS and PPF. Until now, I have kept my investments in NPS to a bare minimum. However, it is possible that I may start routing more in the future.

Let us digress a bit to understand why I may do that.

Over the past decade, the tax treatment of many popular investment products has become adverse. Or rather it has become less benign. Examples include:


Traditional Insurance plans

Unit Linked Insurance Plans (ULIPs)

Equity Mutual Funds

Debt Mutual Funds

PPF is the only debt investment that has retained its benign tax-free status.

NPS is the only investment for which tax incentives have improved over the last decade. The only investment product.

It is difficult to find a reason for NOT investing in PPF. It is the best fixed income investment for retirement. Hence, unless you decide to shun debt investments completely for your retirement portfolio, there is little reason why you should not invest in PPF.

The decision to invest in NPS is a more nuanced one.

In absence of tax benefits, NPS is no special product. We could have easily replicated the product by using mutual funds. Even in NPS, your money gets invested in diversified funds only. Mutual funds also do not have restrictions of NPS. No compulsion to buy an annuity plan either. In any case, if you must buy one, you can buy an annuity plan from the sale proceeds of your mutual fund corpus too.

However, with adverse developments in the taxation of mutual funds, portfolio rebalancing has now become quite an expensive affair with mutual funds. NPS provides tax-free rebalancing. And that I think is the greatest advantage of NPS, especially for big portfolios.

I compared NPS and mutual funds on various aspects in a post recently. While mutual funds score heavily in terms of flexibility and choice of funds, NPS stole the march on the taxation front.

Between PPF and NPS, it is not an either-or decision. You can invest in both. In fact, you do not have to limit yourself to just these two products. You can consider mutual funds as well.

PPF for tax-free debt returns.

NPS for tax benefits and tax-free portfolio rebalancing.

Mutual funds for flexibility and wider choice in investments.

You will have to decide the allocation to each for your portfolio.

Additional Read

Financial Planning for Retirement: Staggering Annuity Purchases can increase income and reduce risk during retirement.

PFRDA Website (PFRDA regulates NPS)

The post was first published in March 2016 and has been regularly updated since.

Image Credit: Unsplash

Disclaimer: Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market is subject to market risks. Read all the related documents carefully before investing.

This post is for education purpose alone and is NOT investment advice. This is not a recommendation to invest or NOT invest in any product. The securities, instruments, or indices quoted are for illustration only and are not recommendatory. My views may be biased, and I may choose not to focus on aspects that you consider important. Your financial goals may be different. You may have a different risk profile. You may be in a different life stage than I am in. Hence, you must NOT base your investment decisions based on my writings. There is no one-size-fits-all solution in investments. What may be a good investment for certain investors may NOT be good for others. And vice versa. Therefore, read and understand the product terms and conditions and consider your risk profile, requirements, and suitability before investing in any investment product or following an investment approach.

128 thoughts on “NPS vs PPF: Which is better?”

    1. hello neelam,
      kindly share your whatsapp number, i am doing both PPF & NPS since last 7 yrs.. i have more idea about this..please provide your mobile number

      1. Hi Jayesh,
        Please do not ask for mobile numbers on this forum.
        If you have anything to add, please mention in the comments section.

    1. That is the product structure.
      If you are investing within limits (80CCD(1) and 80CCD(2), then principal won’t be taxed twice.
      If you use the entire amount to purchase annuity, you don’t have to pay any tax upfront.

  1. PPF is certainly better than NPS according to my view, but additional deduction under section 80CCD(1B) certainly made it popular for this year’s IT assessment.

    Could you please confirm my below understanding for NPS corpus during withdrawl –

    1. Max 60% of NPS corpus amount can be withdrawn out of which 40% amount is tax free & 20% amount will be taxed.
    2. Min 40% can be invested in annuity & it will be not taxed. But pension every month will be taxed.

    i.e. 40% annuity value + 40% withdrawn value will not be taxed & 20% withdrawn value will be taxed if we assume that 60% withdrawn & 40% invested in annuity purchase.

  2. I have few queries regarding the understanding of NPS for the case of opening NPS using online AADHAR number only.

    1> Is it mandatory to pay initial & later contributions with the bank savings account mapped to NPS? Suppose I have opened NPS and mapped my SBI a/c with it. Can I pay my initial & future contribution of NPS from other nationalized banks like Canara Bank, Bank of India, etc.?
    2> How will I update the NPS details later like change in nominee, change of fund manager, change in allocation of funds, etc.? Are there any charges for updation if I open NPS using AADHAR?
    3> How will I perform withdrawl of NPS accumulation amount from NPS after maturity (after 60 years) from e-NPS or through online mode? OR, visiting bank branch as mapped in NPS opening is required during withdrawl?
    4> How to choose and open Annuity at maturity if NPS account opened online using AADHAR?
    5> Is it mandatory to pay service charges additionally during annuity purchase?
    6> Do SBI charges NEFT charge of Rs4+ST if I perform NPS contribution from SBI e-portal?

    1. Deepesh Raghaw

      Dear Somen,
      1. No. You can use multiple accounts.
      2. You can visit PoP to make changes. Quite possible they allow you to do it through the portal itself.
      3,4: Go through the following link for more about withdrawals from NPS:
      In my opinion, by the time you retire, there must be an online mechanism to purchase annuity.
      5: What service charge are you referring to? Btw, all charges in NPS are mandatory. Not to subscriber’s discretion.
      6. Can’t comment about this. Try it out.

  3. Is there any PFRDA office in metro cities like Kolkata, Mumbai & Chennai apart from Delhi from where I can communicate if I am having any issue with NPS account? I am new to it and I need help.

    1. Deepesh Raghaw

      Dear Suman,
      PFRDS is the pension regulator. You go to the regulator if the other participants are not helping.
      You can always go to PoP or CRA offices.

  4. My age is 35 years. If I contribute 150000 per year. After 25 years at the age of 60 years on current rate of interest 8.7 .what’s the amount in my hands

    1. Deepesh Raghaw

      Dear Pankaj,
      If you invest Rs 1.5 lacs on April 1 every year for 35 years and the PPF interest rate stays at 8.1% p.a. (at present, it is 8.1%), you will have Rs 2.8 crores in 35 years.

  5. My age is 36 years. I have already different saving scheme. I am afraid of Investment. Please tell me if I invest minimum of Rs6K per year till the age of 60 years, what would be expected amount @8% in 24 years ?

  6. csir, my current salary is 2.66 lac/ annum. i have personal ppf and NPS account. I invest 60000 in ppf per annum and now i want to invest 30000 in NPS. Is it good or i i have to invest more in NPS than ppf.
    Is equity NPS is good than equity mutual funds

    1. Wouldn’t advise you to invest in NPS at current salary level.
      Take exposure to equity funds for the excess Rs 30,000.

  7. I have 10 lacs in my hand. I need monthly income on 5 lakhs and other 5 lakhs I can invest in equity.also I should be able to liquidate as and when I need. Pls suggest me how to invest 5 lakhs each. I don’t have income and I am not filing returns. Pls suggest me in what way I can earn much income.

    1. Dear Naveen,
      Not easy to tell. Depends on how much monthly income you need.
      Monthly income on Rs 5 lacs won’t be more than Rs 3.5-4K. You must see if this is enough.

          1. Dear Naveen,
            Even with this, it is very difficult for me to comment. Will need much more info.
            Suggest that you invest in MIP. These are MFs with 15-20% exposure to equity.

  8. Hi Deepesh Sir,

    I am 38yr old and thinking in to invest 1.5 lac annually in PPF , how much amount I will get after 15 yrs from Now . Please make me understand calculation method if possible

    1. Hi Ritesh,
      Interest rate on PPF is not fixed.
      Assuming you deposit Rs 1.5 lacs on April 1 and the rate stays constant at 8% p.a., you will end up with ~Rs 40 lacs.

  9. hai deepesh,

    I have an ppf account which has accumulated around 4 lakh as on day . Now iam regularly investing 1.5 lakhs annualy. my age is 44. what could be the corpus amount which I could expect after my 55yrs ( 11 yrs of investing ).hope I am clear at my question !

    1. Assuming corpus of Rs 4 lacs as on March 31, 2017 and that you deposit RS 1.5 lacs every year on April 1 for the next 11 years and that PPF provides constant return of 8% p.a. you will end up with ~Rs 27 lacs.
      Please understand there are many assumptions.

  10. I have a basic doubt.
    Suppose I invest 1.5 lacs only in PPF and PF.
    then can I invest additional amount upto 50K in NPS ?
    Because wherever I had read, it says “additional upto 50k in NPS”, this means you should invest rest 1.5lac in NPS only under 80C then only this 50k will be eligible for tax exemption.

    did I understand it correct ?

    1. If you have invested Rs 1.5 lacs in PPF and EPF, you can invest up to 50K in NPS to get extra tax benefit.
      There is no such requirement that you have first invest Rs 1.5 lacs in NPS and then you invest an additional 50K in NPS to get exta tax benefit.

  11. I stumbled upon this blog only today after I got my PRAN for NPS and now I have become a bit skeptical about going ahead with the investment. I have not started investing yet. Is it compulsory to start once i have got the PRAN or I can still consider other options as discussed in your blog?

    1. Minimum contribution is Rs 1,000 per annum.
      If you don’t make the minimum contribution, your account will be frozen.

  12. Thanks for such an informative post Deepesh. Your method of explaining is very straight and clear. I loved reading this article. Can you please guide me in my financial planning?

    1. Thanks Arun for the kind words!!!
      Please understand I provide specific financial advice only on a professional basis.
      You can visit “Our Offerings” for more on this.

  13. I AM 53 YEARS OLD, WOUL LIKE TO INVEST NPS MONTHLY 10,000, is it advisable at this age. What will be my monthly pension @8%.

    1. If I were you, I wouldn’t invest. My pension will be a negligible amount.
      In any case, NPS provides market linked returns.

  14. You have mentioned that “You cannot invest more than Rs 1.5 lacs in PPF per financial year. This cap includes your own PPF account and all those PPF accounts where you are the guardian.” I know so many people who are not only investing 1.5 Lac Rs in their PPF but also in the PPF account where they are guardian. Now suppose if a person is investing 3 Lac Rs (1.5 Lac in his PPF and 1.5 Lac in the name of his child where he is the guardian), the advantage will be though he will get tax rebate on 1.5 Lac only but he will get tax free returns (both the accounts)at the maturity.

    1. Dear Kshitij,
      I understand what you are referring to.
      There is PPF Act and there is income tax act.
      Tax benefits are defined under Income Tax Act.
      The restriction (as mentioned in the post) is laid out in the PPF Act. In fact, you declare this when you open PPF account.
      Income Tax Act has nothing to do with it.
      There are a few posts on my website on PPF. Suggest you go through them.
      That many people have been, knowingly or unknowingly) been able to do it does not make it right.
      Many people evade taxes but that does mean tax evasion is permitted. There will be penalty if caught.
      With technology advancements, I believe it is only a matter of time.

    1. Manish, You got to decide for yourself.
      I have listed out pros and cons of both and my preference.
      Why do you want to invest in NPS?


    Dear Sir..
    Thanks for your blog. However I am confused with the following points. Please clarify.
    I planning to contribute monthly rs.2000 under NPS, my age is 33. I already have a PPF account but failed to save under this, as I don’t have online option.

    1.How much pension I will be getting at age of 60? If I don’t withdraw any amount.

    2. What is the annuities that I need to purchase, I have no idea.

    3. Should I leave this option of opening NPS account and concentrate only PPF ,as I have already opened and didn’t save.

    4. Can you help in understanding which is to choose from tier I or tier II

    5.If I want to withdraw partial amount from the lump sum amount, what is the taxable amount and will my pension very cuz of this.

    6. If I die or lose my job, before 60 years what will happen to this account and my contributions

    Many thanks in advance for your time and advice.

    Kind regards,

    1. Dear Mohana,
      You are welcome.
      There are many posts on NPS on my blog that answer the questions you have raised.
      Suggest you go through such posts.
      Btw, NPS provides market linked returns. There is no guarantee of the pension amount.

      1. Thanks for the reply Deepesh.

        Just curious to know, if you were in my position, what will you decide? Whether to continue with PPF in post office or start NPS…

        Apologies if I am asking too many questions.

        Once again thanks for your time.


        1. Nothing wrong in asking questions Mohana.
          What is your position? You have not provided any information.
          Investment choice depends on multiple factors.
          As mentioned in the post, I prefer PPF over NPS (based on my position).

  16. Hi Sir,
    Very nice post,
    My father age is 58 and mother is 53,
    Both are engaged in business.
    Till what date they can contribute in NPS, if we start today

  17. Sir, I am already subscribing to 1.5 L in 80C (Incl. PPF).
    So, wanted more tax benefits such as NPS (I am in 30% tax bracket).

    If I have to claim max under 80CCD(1B), I need to invest only 50K in NPS or 1.5L+50K = 2Lakh under NPS.

    Meaning, by investing only 50K in NPS, can i claim the same under 80CCD(1B)?
    Pl. clarify.

  18. Sir,now my age is 42.If I invest 2.6k per month i.e. 31200 per year in NPS, at the age of 60 how much i will get as a monthly pension?

    1. Deepesh Raghaw

      Dear Sir,
      NPS provides market linked returns. Therefore, not possible to tell accurately how much you will get as pension.

  19. Hi Deepesh,

    As per the latest ministry announcement PPF rates have gone down even lower by 10 basis points. Do you still favour PPF with Mutual funds over NPS given the inflation rate?

    Also if the salary falls under 30% tax slab how much of a tax benefit am I looking at if I invest 36k in NPS.


    1. Deepesh Raghaw

      Hi Abhinandan,
      My reservations against NPS were hardly ever based on returns.
      Interest rates in the economy have gone down. Returns from debt portion of NPS will come down too unless the fund manager takes credit or interest rate risk.
      There are flexibility issues, liquidity issues, purchase of annuity, investment issues (NPS charging expense ratio to invest in another equity fund), taxation at maturity etc
      I agree with you.
      I have been asking clients falling in 30% ax bracket to invest up to Rs 50,000 per year in NPS. The only condition is that NPS investment should not crowd out other investments.

  20. Hi Deepesh,

    I got to know that ICICI is offering Savings Suraksha Plan for premium pay term of minimum 5 to maximum 30 years with 8% fixed rate of interest through out the term (with a additional benefit of Insurance policy for 10 times of Annual Premium). Where as PPF rates are getting changed frequently. Can you please suggest if this Savings Suraksha Plan is better than PPF.

    1. Deepesh Raghaw

      As I understand, ICICI Savings Suraksha plan is a non-participating plan i.e. returns are guaranteed upfront.
      If you have the numbers, you can work out the returns.
      It is extremely unlikely the returns will be anywhere close to 8%.
      Quite likely you are being misled.

  21. Hi Deepesh,

    Can you please let me know which is better PPF or NSC (from post office) if I invents 1,00,000 p.a for 25 years.

    1. Hi Kiran,
      PPF and NSC vary in interest rates, maturity and taxation. So, may vary.
      Since you plan to invest for 25 years, PPF looks a better choice to me.

  22. virendra Lal srivastava

    Sir, Good Morning! i would like to invest 2000 per month. my age 44. where i can invest Ppf or NPS to get best retun after retirement. please help. my job is private. there is pf deducting.

    1. Deepesh Raghaw

      Can’t comment in absence of any information.
      If you already have PF, you can consider investing small portion in balanced funds ( I assume you are never invested in mutual funds before).
      NPS can be avoided unless you fall in 30% tax bracket.

  23. If i invest 1.5 Lac in PPF and 50 Thousands in NPS in a financial year, So can i claim total 2 Lac of invesment in tax filing.

  24. If I deposit 1.5lacs in PPF and 50 thousands in NPS, so can i claim total 2 lac of investment while tax filing


    i have a very simple question.
    In NPS , WHAT WE INVEST EVERY MONTH , we get UNITS the same month based on NAV.

    That means , i accumulate only units .

    Now if we take NPS for say a period of 34 years of GOVT SERVICE,
    ALL THESE 34 YEARS , you will be accumulating only UNITS.

    If the market is almost STABLE , then NAV’s will be nominal & you get nominal units.

    BUT ASSUME THAT IF YOU PUT MONEY IN PPF, Will it not happen that the TIME FACTOR in PPF

    IAM CENTRAL GOVT OFFICER IN 30% TAX BRACKET & EVERY MONTH GOVT is compulsory cutting salary
    & investing my money in market & iam getting UNITS. The market is more or less stable, so i get some units.


    so NPS can have devastating effects for a long service duration of a govt employee say 34 years.

    1. Deepesh Raghaw

      Dear Shwetabh,
      What do you mean by Time Factor?
      I assume you are referring to compounding i.e. you money keep earning good money and grows bigger over a period of time.
      This effect of compounding, you will see in NPS too. Just that the returns in NPS are not guaranteed but market linked. Therefore, there is greater risk.
      For instance, suppose you purchase units at Rs 10 today. Let’s suppose further that after 20 years, the value of unit is Rs 100.
      Your investment has grown 10 times.


    In my almost 13 years of service, my contribution & govt contribution together is just 21 LACS.
    Now i have almost 20 years left & i assume i will accumulate say 60 lacs by the retirement age.

    BUT THE FACT my money & govt contribution together around 20k is invested every month so it becomes 2..4 LAC investment in MARKET every year. This much money if you put in PPF in 15 years time it will grow like anything & also PPF is extendable up to additional 5 years.


    IF THERE is LOT OF FLUCTUATION IN NAV’s then there is some HOPE , but otherwise i think , we get nothing at the time of retirement


    1. Deepesh Raghaw

      Dear Shwetabh,
      You can invest only 1.5 lacs in PPF per year.
      In central government NPS, the exposure to equity is capped at 15% (the last time I checked).
      So, there will be much lesser volatility.
      Have you ever invested in stock or equity mutual funds before?


    2.4 LAC RUPEES every YEAR IN PPF AT 8.1 INTEREST will become
    71 Lacs IN 15 YEARS, IMAGINE,


    SOMEWHERE, THIS NPS is being MARKETED & PEOPLE are made to believe that it is GOOD.


  28. Hi Deepesh,

    Can you please suggest which is better out of PPF and ELSS if I can invest 10 to 15k every month. Or if a combination is good, please suggest how much would be better contribution for each.

  29. Very nice post, really helpful.
    can you please give your feedback on NPS vs VPF, especially when an person already used his 80C limits, Rs.1.5 lakh with other eligible investments

    1. Deepesh Raghaw

      Hi Benny,
      If it is about tax-saving and you have already finished your limit of Rs 1.5 lacs, you won’t get any additional benefit for investment in VPF.
      Only, NPS will give you for Rs 50,000 under Section 80CCD(1B).

  30. Thomas Paikada

    As per your comments, NPS returns are subject to market risks. Can you please elaborate on this? Im now 30 years. If Im investing 25000 per year in NPS, these amount will be invested in mutual funds? Can we have the option to select them? Can I assure any minimum amount at the age of 60, because at that time the amount I invested will be 750000? I understand that we cannot even withdraw the amount fully also? How is the returns from mutual funds? Please advise as Im totally unaware of these shares and mutual funds.

    1. Deepesh Raghaw

      Hi Thomas,
      The return in NPS is not guaranteed. Depends on investment performance of underlying investments.
      Yes, NPS has fund managers. You trust your money with a fund manager, who will invest your money in funds of your choice.
      Yes, you can decide allocation between Equity (E), Government Securities (G) and Corporate bonds (C). There is option for alternate investments too.
      If you want lower volatility, you can invest more in C and G.
      There is no guaranteed minimum.
      Performance of NPS funds, You can check out at this link.


    Deepesh Raghaw

    It’s really helpful, One can understand EASILY
    Thanks for your POST…………

  32. I have invested PPF, NPS and ELSS
    NPS and ELSS is recently opened
    Which is batter to invest more when chose NPS and ElSS
    It is possible to invest minimum to NPS and more invest towards ELSS

  33. I have invested PPF, NPS and ELSS
    NPS and ELSS is recently opened
    Which is batter to invest more when chose NPS and ElSS
    It is possible to invest minimum to NPS and more invest towards ELSS


  34. Sarang Deshmukh

    HI Deepesh,

    I have recently changed plan from Active (Equity exposure capped at 50%) to Auto-aggressive (equity exposure uto 75%). I did change keeping in mind more towards equity than debt during my risk taking age. Does this make sense when your article says don’t invest more than 50k in NPS. Maximum towards Equity will give good returns as equity score over debt anytime.

  35. Dear sir,
    I earn 7.5L PA . I do not have PPF Account. For the tax saving purpose I plan to open NPS account. is it okay to open. if so how much can I contribute towards NPS.


    1. How much can you invest per year? Not just in NPS but in total?
      Frankly, I am not keen on investing in NPS unless you are in 30% tax bracket.

  36. Kedar Singh Deshmukh

    In my point of view, the comparison is not well founded.

    NPS is mistakenly taken as NPS Tier I. Benefits of NPS Tier II account is completely ignored.

    NPS Tier II account is highly liquid with no investments limit at all. Neither any compulsion to buy annuity.
    Withdrawal tax implications might be a concern though which I think should be on par with mutual funds but at present it is dependent on tax payers’ slab.

    I would be happy if returns of both products be shown.
    I think comparing NPS Tier II and PPF would be more rational and here NPS Tier II will score.

    For tax exemptions other 80C components are available including Mutual funds. Tier I will be used capping 50000 which again will give additional tax exemption under 80CCD. One can replace PPF with NPS Tier II.

    1. Hi Kedar,
      Appreciate your inputs.
      You are right. The comparison is not well founded. Perhaps, the only reason why we are discussing this is because both give tax benefits.
      Otherwise, it makes little sense to compare a pure debt product with a hybrid product.
      I beg to differ with rest of your argument.
      In my opinion, NPS Tier II is clearly avoidable. It is for this reason I didn’t compare it against PPF.
      You can invest in mutual funds and enjoy equal freedom to take out your money and have better control.
      Please don’t ignore that a few NPS funds invest in actively managed funds. So, you might incur fund management expense twice.
      Additionally, tax treatment of NPS Tier II is not clear.
      For me, NPS Tier II is a clear avoid.

  37. HI Deepesh,

    Thanks for wonderful post.This will surely educate & help people
    who don’t have any knowledge on blog subject.

    I have some queries as below.

    I fall under 30% tax bracket.AS you mentioned NPS will give us additional tax benifit of Rs 50,000 under Section 80CCD(1B).
    What are all different invest option available other than 80C & 80CCD(1B).

    Thanks in advance for investing your time to answer my queries.

  38. Hi Deepesh,

    Thanks a lot for sharing such informative and detail subject.. We are truly enlightened with lot of knowledge..

    I am 45 years old and I belong to 30% tax segment and I already have MFs, LICs, Home Loan etc.. My Home loan will be over in another 11 years. besides this I do not have any other loan as of now.
    I like to invest not just for the sake of Tax saving, however I have not yet availed that extra 50K tax saving thru NPS.. So I got the gist that both NPS and PPF have their Pros and Cons, Just from the future investment perspective of retirement, I am good to invest another 120 K per annum for the same.
    In your opinion (if you were me), Would it be good to put 60K each per annum to both PPF and NPS ? or do you suggest any other schemes to invest for a good retirement at 65 yrs (I cant retire at 60 yrs.)



    1. Hi Shantonu,
      More than 50K in NPS, in my opinion, is not needed.
      You may be better off putting the excess amount in mutual funds.However, that’s is a different topic.
      If the choice is between PPF and NPS, for you, I suggest you keep it at 50K for NPS and 70K for PPF.
      I assume you are talking exposure to equity through other means and your marginal tax rate is 30%.

  39. Hi Sir,
    I have a simple question. I am a IT sector employee. My earning is 7l/annum . I want to invest some amount for tax benefit and future planning . Which is the better option to invest. My age is 34. My employer is suggest for NPS. Is PPF is better than NPS. Is the PPF withdrawn before 15years . Please suggest.

    1. Hi Ajaya,
      If I were you, I wouldn’t opt for NPS at this point of time.
      PPF and NPS are two very different products. Not exactly comparable.
      I prefer PPF over NPS.

  40. Hello Deepesh,

    Thanks for such good discussion on NPS. I have a interesting problem on my side and need your input. I am from a organization where EPF is very minimum (2000 per month), I do not have PPF till now (even after 10 years in job). However have stable real estate property, medical policy, life insurance policy and cash needed for next 4-5 years of survival. Now I want to invest in safer side of investments(for retirement), should I go for PPF or NPS or just trust Debt and Balanced funds?

    Thanks in advance,

    1. Hi Sharad,
      You are welcome!!!
      Not enough info for me to suggest anything.
      As mentioned in the post, I prefer PPF over NPS.
      Some exposure to equity funds (you can start with balanced funds) is certainly warranted. Btw, equity funds, including balanced funds are volatile.

  41. Hi Deepesh,
    I must say its worth to read your article. Now I have a clear picture for doing my tax savings and investments.

  42. R Radhakrishnan

    Under 80CCD I (B), What is the percent of withdrawal of the additional investment of Rs 50,000/- in tier – I of NPS at age of 60 ?

    1. Deepesh Raghaw

      Dear Radhakrishnan,
      Once the money in invested, it does not matter whether you took tax benefit for the investment or not.

  43. Awesome explanation Deepesh.!

    Could you pls clarify me, Since i already have enough investments (Housing loan, LIC, HRA & VPF) for my tax exemptions. What is best for further investment (ie, NPS or PPF or any other Mutual Funds) for pension or some good returns after 15 or 20 years.

    Since i am unable to take a clear decision, need expert’s opinion in this field like you

  44. This forum is very informative. I have different question. I have following questions for NPS.
    1. After 60 years, how much pension person will received in terms of percentage ?
    2. Is it possible after 60 years, Person will not withdraw any amount from Tier 1 and get pension on full amount ?
    3. After 60 years is it mandatory person has to withdraw full amount from Tier II.

    Vipul Mehta

    1. Hi Vipul,
      1. Depends on the purchase amount and prevailing annuity rate.
      2. Ye, you can purchase annuity using the entire corpus. 40% is the minimum.
      3. Tier II can continue as long as you continue Tier I account.

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