EPF vs. PPF vs. NPS: Preparing for retirement is a crucial part of every working person’s life. Choosing the right option early not only secures the future but also ensures a regular income like a stable pension. EPF, PPF, and NPS are the three major schemes in India, which appeal to people based on different needs and risk profiles. The interest rates, tax benefits, and return structure of these schemes make them unique.
EPF is the Most Reliable for Employees
For years, the Employees’ Provident Fund has been considered the safest savings scheme for the salaried class. For the current financial year 2024–25, the interest rate on EPF has been fixed at 8.25%, which is deducted directly from the employee’s salary. Contributions from both the employee and employer combine to create a strong fund over the long term. The biggest advantage of EPF is its low-risk nature, as the deposited amount is completely safe. Significantly, withdrawals after five years of continuous service are completely tax-free, making it a strong pillar of a retirement portfolio.
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PPF Offers Tax-Free Income
The Public Provident Fund is an ideal option for investors seeking risk-free long-term savings. Currently, PPF offers an interest rate of 7.1% and falls under the EEE category, meaning the deposit, the interest earned, and the maturity amount are all tax-free. Its total tenure is 15 years, but partial withdrawals and loan facilities make it more flexible. The minimum annual investment requirement of ₹500 and a maximum of ₹1.5 lakh makes it highly attractive to the middle-income group. PPF remains a strong option for those seeking a secure income.
NPS Offers Highest Returns
The National Pension System is a market-linked scheme, investing in a mix of equities, corporate bonds, and government securities. Over the past few years, NPS has generated an average return of 9 to 11%, higher than both EPF and PPF. This scheme is particularly popular among young investors because they can choose their own asset allocation and fund manager. Tax benefits include an additional deduction of up to ₹50,000 under Section 80CCD(1B). At retirement, 60% of the corpus is tax-free, and the remaining corpus is used to create a pension, ensuring a regular income in old age.
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Which Option is Best for Whom?
Experts believe that no single formula applies to everyone when it comes to retirement planning. Younger investors, i.e., those under 35, are advised to invest more in NPS, as equities offer better returns in the long run. Between the ages of 35 and 45, a balanced mix of EPF, PPF, and NPS ensures a stable and profitable portfolio. Meanwhile, investors over the age of 45 should focus more on safer options like EPF and PPF to minimise risk closer to retirement. Investing wisely across the three schemes can create a large, sustainable, and inflation-resistant retirement fund.