Key points
- EPF and PPF pay government-set, fixed rates; NPS returns are market-linked.
- EPF is for salaried employees; PPF and NPS are open to any resident Indian.
- EPF and PPF are tax-free on maturity; in NPS, 60% of the corpus can be taken tax-free and part of the rest must buy an annuity.
- Most people benefit from a combination rather than choosing one.
At a glance
| EPF | PPF | NPS | |
|---|---|---|---|
| Who can invest | Salaried employees of covered establishments | Any resident individual | Any Indian citizen aged 18–70 |
| Contribution | 12% of basic + DA, matched by employer | ₹500 to ₹1.5 lakh a year | Flexible; minimum ₹1,000 a year (Tier I) |
| Return | Declared yearly; 8.25% for FY 2025-26 | Set quarterly; 7.1% since April 2020 | Market-linked, depends on asset mix |
| Lock-in | Till retirement, with partial withdrawals for specific needs | 15 years, extendable in 5-year blocks | Till age 60, limited partial withdrawals |
| Tax on maturity | Tax-free after 5 years of service | Tax-free | Up to 60% lump sum tax-free; annuity income taxable |
EPF: the automatic foundation
If you are salaried, EPF is usually your largest retirement asset without you doing anything. You contribute 12% of basic pay plus dearness allowance, and your employer contributes 12% too (part of which goes to the EPS pension). Interest on employee contributions above ₹2.5 lakh a year (₹5 lakh where the employer does not contribute) is taxable. Voluntary PF (VPF) lets you contribute more at the same rate.
PPF: guaranteed and tax-free
PPF suits anyone who wants a government-backed, tax-free return — including the self-employed. Deposits qualify for Section 80C in the old regime, and the interest and maturity amount are tax-free (the “EEE” status). The trade-off is a 15-year lock-in, a ₹1.5 lakh yearly cap and a rate that, though fixed for each quarter, can be revised.
NPS: market-linked and low-cost
NPS invests in a mix of equity, corporate bonds and government securities that you choose, or that shifts automatically with age. Its fund management charges are among the lowest in the country. Old-regime taxpayers get an extra ₹50,000 deduction under Section 80CCD(1B), over and above 80C; employer contributions are deductible under Section 80CCD(2) in both regimes, up to 14% of basic + DA in the new regime. At 60, part of the corpus must buy an annuity that pays a taxable pension — traditionally at least 40%, though PFRDA has been relaxing the exit rules, so check the current limits before you plan around them.
Using them together
- Let EPF build automatically, and avoid withdrawing it when you change jobs — transfer it instead.
- Use PPF for the safe, tax-free part of your long-term savings, and as a fixed-income anchor.
- Add NPS if you are in the old regime and want the extra ₹50,000 deduction, or if your employer offers NPS contributions.
- Use equity mutual funds for growth and flexibility — none of these three offers easy access before retirement.
Getting money out early
| Scheme | Before retirement / maturity |
|---|---|
| EPF | Partial withdrawals for specific needs such as a house, medical treatment, marriage, education or unemployment, subject to service conditions and limits |
| PPF | Loan from year 3 to 6; partial withdrawal once a year from year 7; premature closure after 5 years only for specified reasons |
| NPS | Partial withdrawals of your own contributions for specified purposes after 3 years, a limited number of times; early exit rules are stricter |
None of the three is designed for easy access. Keep your emergency fund elsewhere.
Which comes first?
For a salaried employee, EPF is already happening. Beyond that, the order depends on your tax regime and your need for safety. In the old regime, filling 80C (EPF and PPF often cover it) and then the extra ₹50,000 NPS deduction gives an immediate tax saving. In the new regime, those deductions do not apply, so the choice rests on return, safety and liquidity — PPF for guaranteed tax-free growth, equity funds or NPS for long-term growth.
Frequently asked questions
Can I have both PPF and EPF?
Yes. A salaried person can contribute to EPF through their employer and open a PPF account independently. Both count towards the same ₹1.5 lakh Section 80C limit in the old regime.
Is NPS better than PPF?
NPS can invest in equity and so may grow faster over long periods, but its returns are not guaranteed and its exit rules require part of the corpus to buy an annuity. PPF is guaranteed and fully tax-free but capped at ₹1.5 lakh a year. They suit different purposes.
What happens to my EPF when I change jobs?
Transfer it to the new employer’s account through the EPFO portal using your UAN. Withdrawing it breaks the compounding and may be taxable if total service is under five years.