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New Delhi: When an individual plans for retirement, the biggest question which pops up in their mind is - where to invest so that the returns are strong. Employees Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS) are three such schemes which provide benefits in different ways. EPF and PPF offer fixed and secured interest, whereas NPS provides an opportunity for equity-linked investment, which can increase returns significantly in the long run.
At present, the Government has fixed the interest rate of 8.25 percent for EPF beneficiaries. This government-controlled financial scheme is especially beneficial for salaried people, because every month a part of their salary is automatically deposited. The risk is very low and withdrawals after the completion of five years are not taxed. EPF is a strong option for investors seeking secure and fixed income.
| Parameters | EPF | PPF | NPS |
|---|---|---|---|
| Nature | Mandatory for some salaried employees | voluntary | Voluntary, market-linked |
| Returns/Interest | 8.25% (FY 2024–25) | 7.1% (quarterly review) | 9–11% (equity-based, variable) |
| Contribution | 12% Basic + DA (mandatory up to ₹15,000), employer also contributes | Minimum ₹500, Maximum ₹1.5 lakh/year | No limit, flexible |
| risk level | ILO (Government Regulated) | ILO (Government Regulated) | Medium–High (Market-Linked) |
| liquidity | Part withdrawal after 5 years | Loan for 3–6 years, part withdrawal in the 7th year | 25% withdrawal after 3 years (for limited reasons) |
| Lock-in period | until retirement | 15 years | Up to the age of 60 |
| Tax Deduction (Old Tax Regime) | 80C (₹1.5 lakh) | 80C (₹1.5 lakh) | 80CCD(1B) – Additional ₹50,000 |
| tax on interest | tax-free | Tax-free (EEE) | Tax-Deferred |
| Tax on Withdrawal | Tax-free after 5 years | Completely tax-free | 60% tax-free, 40% annuity (taxable) |
| Flexibility | All time low | Medium | Highest (asset allocation option) |
| Best for whom | Automatic savings for the salaried | Safe and tax-free fixed returns | Equity-led high growth |
| Special Point | Employer Contribution + Secure | EEE Tax Benefit | Highest returns over the long term |
Why is PPF considered the safest option
PPF is a fully voluntary scheme and earns 7.1 percent interest fixed by the government. It is completely tax free, so low-risk investors choose it for a long time. Although the lock-in period is 15 years, the facility of withdrawing money on sudden needs is limited. This is a great option for those seeking secured interest and tax free returns.
NPS is a market-linked scheme and offers the option of investing in equities, bonds and other instruments. Its long-term return rate ranges from 9 to 11 percent. In this, you can change the asset allocation according to your needs and you get an additional exemption of Rs 50,000 in tax. If you want to create a fast-growing retirement fund in the long term, then NPS is the best option.
| Scheme | Part Withdrawal | Full Withdrawal |
|---|---|---|
| EPF | After 5 years for education, marriage, medical etc. | Tax-free on retirement |
| PPF | Part withdrawal from 7th year, 3–6 years loan | Full withdrawal after 15 years |
| NPS | 25% after 3 years (limited reasons) | 60% tax-free, 40% annuity on retirement |
How much is right to invest in which scheme
According to experts, investors can increase their returns by investing more money in NPS at an early age. Investments in PPF and EPF should be increased as you get older so that the portfolio is safe. Mixed strategies are considered most beneficial for investors above 40 years of age. A balance of equity and fixed returns provides adequate funds at the time of retirement.
Tax
| Stage | EPF | PPF | NPS |
|---|---|---|---|
| Contribution | 80C | 80C | 80CCD(1B) (+80C) |
| Tax on returns | tax-free | tax-free | Tax-Deferred |
| Tax on Withdrawal | Tax-free after 5 years | Completely tax-free | 60% tax-free, 40% taxable |
Many people withdraw EPF while changing jobs, which leads to tax loss. Many people stop their money in PPF without thinking about the future needs and stay away from NPS because it is a market-based scheme. Experts advise that it is wrong to rely only on fixed returns, because equity exposure is necessary to beat inflation.
All three government-backed schemes offer different types of monetary benefits. EPF provides secure returns, PPF offers tax-free growth, and NPS offers the best compounding returns over the long term.
