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What is the Best Saving Option for Retirement: NPS or PPF?

Retirement is a reality that everyone needs to think and plan for. After all, at the end of our job life, we have to retire and for that, we need to have saved up considerable sums of money. Why? Well, after you retire, probably your only source of income shall be your savings.

Retirement is not always a stressful concept, as long as you plan for it. After all, retirement means you’ll finally have time to enjoy your life, go on dream vacations, and ultimately enjoy the money saved up from your life’s hard work. But if you don’t have enough saved up? You probably have to work more years despite having aged, be stressed continuously, and generally not be able to enjoy life.

Apart from not having saved enough, there are two things that can break your dream of a good retirement plan. These are inflation and longer life expectancy. Rising inflation means the value of money you are saving up shall be lower during retirement. More life expectancy means you’ll need more money down the line.

Keeping these in mind, the Indian government has several retirement saving options available to everyone. These options just require you to develop a retirement corpus or egg nest or safety net, whatever you may want to call it, out of your own income down the years.
These options just require you to develop a retirement corpus or egg nest or safety net.

These are especially for those who are not under the protection of government-aided social security measures. These retirement savings options are tax free to encourage more people to save up. 

These two options are:

  • Public provident fund

  • National pension scheme

 Both PPF and NPS are covered under Section 80C of the Income Tax Act. You can thus claim tax deductions up to Rs. 1.5 lakh if you invest in any of these.

Similarities between NPS and PPF

  • Both are retirement saving schemes

  • You have to open an account to start investing

  • Comes with certain tax benefits

  • Long-term lock-in period

  • No tax on returns

  • No tax on the final corpus

Differences between NPS and PPF

Difference Between NPS and PPF





Linked to the market

Guaranteed returns


Till the age of 60

15 years

Control on how your money gets invested

You can decide under which fund your money will be invested and which fund manager will handle it

You do not have any control

Liable in case of debt




Now that we have seen the similarities and dissimilarities, it is time to see which the better option is.

NPS vs PPF : Difference in the retirement corpus




Average annual return



Investment amount every year

Rs. 1.5 lakh

Rs. 1.5 lakh

Investment time period

35 years

35 years

Investment in 35 years

Rs. 52.5 lakh

Rs. 52.5 lakh

Retirement corpus

Rs. 4.47 crore

Rs. 2.79 crore

The main difference lies in the compounding power of the corpus. Since some years, the interest rate of PPF has been falling. At the same time, NPS can possibly give 10% more returns. This gap can deepen in the future.

In conclusion, while they are both retirement saving options, you can beat the inflation only through the NPS. Here the tax benefits come with flexibility of invest options.  

Small Savings Interest Changes Withdrawn Immediately

On March 31st 2021, the government had notified about a cut of 40 -110 basis points (100 basis points/bps = 1% interest) on GoI small savings schemes, including Public Provident Fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patra, Recurring Deposit, and Sukanya Samriddhi Yojana (SSY). However, the changes were withdrawn on April 1 2021, claiming them to be an ‘oversight’ - this means the existing interest rates from the previous quarters will prevail. If not rolled back, the move would have seen the PPF interest rate at the biggest low since 1974. It is yet to be seen if the change will be brought back in coming quarters.

NPS Subscriber Age Limit Increased to 70

New subscribers are set to be introduced to the NPS (National Pension System). This includes individuals up to the age of 70, which allows them to have a guaranteed pension scheme. India’s pension regulator reported that the scheme will also allow full withdrawals of up to Rs.5 lakh on maturity.
3 years ago, when the age limit was increased from 60 to 65, about 15,000 individuals above the age of 60 had joined NPS. In a virtual conference, The PFRDA (Pension Fund Regulatory and Development Authority) chairman Supratim Bandyopadhyay has also proposed that those who join after 60 be allowed to hold their NPS accounts till the age of 75. The maturity age will remain 70 for others.

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