Planning for retirement has become very essential with people living longer than ever and rising cost of living. Several retirement savings plans are available, including the Employee Provident Fund (EPF), the Public Provident Fund (PPF), and the National Pension System (NPS). Each of these schemes is backed by the government and designed to encourage regular savings while you are employed. They help you build a substantial retirement corpus for your golden years. So, how do you choose between EPF, PPF, and NPS?
Should you invest in all of them, or focus on a single scheme? Fundamentally, how do they differ in terms of features, benefits, and tax implications? If you are unsure of the answers, start by understanding each plan in detail, then decide which option suits you best.
EPF vs. PPF vs. NPS: Understanding the basics
What is EPF?
As the name suggests, the Employees’ Provident Fund or EPF is a retirement savings scheme available for salaried employees. Established under the Employees’ Provident Funds and Miscellaneous Provisions (EPF & MP) Act of 1952, the EPF scheme provides social security to employees working in establishments covered under the Act. It is administered by the Employees’ Provident Fund Organisation (EPFO), a statutory body under the Ministry of Labour and Employment.
What is PPF?
The Public Provident Fund or PPF is an age-old retirement savings scheme. It is a small savings scheme backed by the central government.
What is NPS?
Introduced by the central government, the National Pension System is yet another government-backed retirement savings scheme. It is regulated and administered by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act of 2013. The NPS is a market-linked contribution scheme that helps individuals save for retirement.
EPF vs. PPF vs. NPS: Who can invest?
Eligibility for EPF:
To be eligible for the EPF, you must be an employee at a workplace that has 20 or more employees and is covered under the Employees’ Provident Funds and Miscellaneous Provisions (EPF & MP) Act of 1952.
If your basic salary is ₹15,000 or less when you start working, you are required to join the EPF scheme mandatorily. Once you become a member of the EPFO, you cannot opt out of it, even if your salary increases later in that job or after changing jobs. However, if your salary exceeds ₹15,000 when you join the workforce, contributing to the EPF is voluntary, provided you are not already a member. If both the employer and employee agree, they can voluntarily opt in by submitting a request under Para-26(6) of the EPF Scheme. Typically, most employers enrol new hires by default.
If your annual salary is ₹15,000 or more, you have the option to contribute 12% of your basic or 12% of ₹15,000, which amounts to ₹1,800, to the EPF each month. Your employer will match the amount you choose to contribute. Remember that the availability of these options may depend on company policy. It is advisable to check with your employer to understand your EPF contribution options fully.
Who can invest in PPF?
Any resident individual can open a PPF account for themselves, a minor, or a person of unsound mind acting as a guardian.
You can open a PPF account at any public or private sector bank that offers these savings schemes. Additionally, you can also open a PPF account at a post office.
Eligibility for opening an NPS account
Any Indian citizen, employee or self-employed, can join NPS individually or through an employer. It is open to all citizens of India and offers different models for various user groups:
- All central government employees who joined on or after January 1, 2004, are covered under the NPS scheme, except for those in the armed forces. This coverage also extends to employees of Central Autonomous Bodies from that date. Additionally, the NPS is available to all state government employees and employees of State Autonomous Bodies, provided that the respective state or Union Territory has opted for it.
- Corporates can voluntarily adopt the NPS for their employees, with contributions based on the terms of employment. If your employer offers you the option to contribute to the corporate NPS, you can choose to do so.
- Any Indian citizen aged between 18 and 70 years, including those living abroad, can also voluntarily opt for the NPS.
EPF vs. PPF vs. NPS: How much to contribute
EPF contribution
There’s two Both the employer and employee contribute 12% of the basic salary (plus dearness allowance wherever applicable) to the EPF every month. Of the employer’s 12% contribution, 8.33% goes to the pension fund and 3.67% to the provident fund. Additionally, employers contribute 0.50% to the Employee’s Deposit Linked Insurance Scheme (EDLI) and another 0.50% toward administrative charges.
For salaries above ₹15,000, the employer’s pension contribution is capped at 8.33% of ₹15,000, with any excess contributions being credited to the provident fund account.
PPF minimum and maximum contribution
You can invest up to ₹1,50,000 in your PPF account every financial year. The minimum amount you need to invest to keep your PPF account active is ₹500 in a financial year. If you don’t invest the minimum amount in a financial year, your PPF account will become inoperative.
NPS contribution
To contribute to the NPS on your own, you must first open an NPS Tier-1 account. The minimum investment required to open this account is ₹500. Additionally, you need to contribute at least ₹1,000 per financial year to keep the account active. There is no upper limit on contributions to the NPS if you choose to invest independently.
As an employee, you can also choose to invest in the corporate NPS if your employer allows it. According to the PFRDA website, contributions to corporate NPS depend on the employer’s policy for its employees. The NPS contribution can be either:-
- Equal contributions by both employer and employee (say 10% each) or
- Unequal by employer and employee (say 10% by employee and 14% by employer) or
- Contribution by only the employer or only the employee
There is no mandate for employers to contribute to employees’ NPS accounts. As an employee, you can claim tax benefits for investing in corporate NPS.
EPF vs. PPF vs. NPS: Interest rate
EPF interest rate
The EPF interest rate for the financial year 2024-25 is 8.25% per annum. This rate is applicable to all contributions made between April 1, 2024, and March 31, 2025. EPF interest is calculated monthly on the EPF contributions, but is deposited into the EPF account only on March 31 of the applicable financial year. Thus, the total accrued interest for the financial year will be credited at the end of the financial year. The EPF interest rate is reviewed annually.
PPF interest rate
The PPF interest rate for the October-December quarter of 2025 is set at 7.1%. PPF interest is calculated based on the lowest balance in the PPF account between the fifth day and the end of each calendar month, and it is credited to the account at the end of the financial year. The interest rate for PPF is reviewed by the Ministry of Finance every quarter.
NPS interest rate
Since the National Pension System is linked to the market, there is no fixed interest rate on it. The money you invest in your NPS is allocated to market-linked products, which is why the returns depend on the performance of the underlying equity and debt funds. Over the long term, NPS has typically delivered average returns in the range of approximately 8% to 12% per annum, depending on asset allocation and fund manager performance.
EPF vs PPF vs NPS: Withdrawal rules
All three schemes EPF, PPF and NPS allow partial withdrawals if you meet certain criteria. Check those criteria carefully before you invest.
EPF tax benefits
To understand the tax benefits of the Employees’ Provident Fund, let’s break it into two parts: a) Employee contribution and b) Employer contribution.
Employee contribution: You can claim a tax deduction for your contribution to the EPF under the old tax regime, which is included within the overall limit of ₹ 1.5 lakh as specified under Section 80C of the Income Tax Act, 1961. However, if you choose the new tax regime, no tax deduction is available for your contribution to the EPF.
Employer contribution: The employer’s contribution to the EPF is exempt under both the old and new tax regimes. It is important to note that the employer’s contribution to the EPF account will become taxable if the combined contribution to the EPF, National Pension System (NPS), and/or superannuation fund exceeds ₹7.5 lakh in a financial year under the new tax regime.
Do keep in mind that the employer’s contribution to the EPF is typically part of your Cost to Company (CTC) but is not considered part of your taxable salary.
Tax benefits on EPF interest
The interest and maturity amount are tax-free under both regimes if the EPF has been held for more than five years. Interest on contributions over ₹2.5 lakh/year will be taxable.
Taxation rule on EPF withdrawal
If you withdraw your EPF before completing five years of continuous service, the withdrawn amount will be taxable according to your tax bracket. If the withdrawn amount is less than ₹50,000, there is no tax deducted at source (TDS). However, if the withdrawn amount exceeds ₹50,000 before completing five years, you will incur a TDS of 10% if your PAN is furnished. No TDS will be applicable if Form 15G or 15H is submitted.
The EPF withdrawal is exempt from tax when an employee withdraws the amount after completing five years of continuous service, and there is no TDS in that case.
PPF tax benefits
Tax benefits on PPF contribution
You can claim a tax deduction of up to ₹ 1.5 lakh under Section 80C of the Income-tax Act, 1961, under the old tax regime. No tax deduction is available for contributions to PPF under the new tax regime.
Tax on PPF interest: The interest earned on PPF is fully tax-exempt.
Tax rules on PPF withdrawal
One of the key benefits of a PPF account is that all withdrawals are tax-free.
Tax deductions for NPS contributions
NPS tax benefits under the old regime
Under the old tax regime, you can claim deductions for both your own contributions and your employer’s contributions to the National Pension System.
- For your own contribution to NPS, you can claim a deduction under Section 80CCD(1). The limit for this deduction is the lower of the actual amount you contributed, or:
– 10% of your Basic Salary plus dearness allowance (DA) (if any) for salaried employees
– 20% of your gross total income for non-salaried (self-employed) individuals
- You can claim an additional deduction of up to ₹50,000 for your self-contribution under Section 80CCD(1B).
- If your employer contributes to your NPS account, you can claim a deduction under Section 80CCD(2). The limit is capped at 10% (or 14% for central government employees) of your basic salary plus dearness allowance (if any). This deduction is within a maximum limit of ₹7.5 lakh for contributions to EPF, NPS, and superannuation funds.
Under the new tax regime
You can claim a tax deduction for your employer’s contributions to your NPS under the new tax regime, also under Section 80CCD(2). The limit is capped at 10% (or 14% for central government employees) of your basic salary plus dearness allowance (if any). This deduction is also within a maximum limit of ₹7.5 lakh for contributions to EPF, NPS, and superannuation funds.
Taxation rules for NPS withdrawal
If you withdraw from the NPS upon retirement at the age of 60, you can take 60% of the lump sum as a tax-free withdrawal. The remaining 40% of the corpus must be used to purchase an annuity plan that provides a regular pension. The pension you receive will be treated as income and taxed according to your tax bracket. However, if the NPS corpus is less than or equal to ₹5 lakh, you can withdraw the entire amount without purchasing an annuity.
NPS vs EPF vs PPF: Where to invest
| Category | EPF | PPF | NPS |
| Returns & Risk | 8.25% fixed returns, zero risk | 7.1% fixed returns, zero risk | 8–12% potential returns, market risk |
| Who Can Join | Only salaried employees in companies with 20+ employees | Open to everyone (except NRIs) | Open to everyone aged 18–70 |
| Lock-in Period | Until retirement or unemployment | 15 years | Until age 60 |
| Tax Benefits | Deduction under 80C (old regime); interest + maturity tax-free | Fully tax-free | 80C up to ₹1.5 lakh + extra ₹50,000 under 80CCD(1B) |
| Withdrawals | Partial after 12 months; full after 5 years or at retirement | Partial from 7th year | Partial after 3 years, up to 25%, max 3 times |
| Employer Contribution | 12% (3.67% EPF + 8.33% EPS) | None | 10% (private) to 14% (government) |
| Flexibility | No flexibility; fixed contribution | High flexibility; ₹500–₹1.5 lakh yearly | Very flexible; choose amount, asset mix, and fund manager |
EPF vs. PPF vs. NPS: Which one should you choose?
All of these products are for retirement savings. While the PPF and EPF offer interest rates set by the central government, the NPS provides market-linked returns. Additionally, all three options offer tax benefits, which can be particularly advantageous if you fall into a high tax bracket. What will be suitable for you depends on various factors, including your financial personality which will influence your risk tolerance, the number of years you have to save for retirement, your overall asset allocation for your retirement corpus, the amount of liability you expect to have when you retire, and how much money you will need during your retirement years. Keep in mind that retirement will be one of the longest phases of your life. Therefore, it is wise to consult a Qualified Financial Advisor who can take all these aspects into account and recommend the best investment options for you.
