Both cut tax, but differently. PPF is fully tax-free (EEE), guaranteed and simple. NPS gives an extra ₹50,000 deduction (and an employer route that even works in the new regime) with higher, market-linked returns but a partly-taxable, locked payout. Most people should use both.
If you want certainty and 100% tax-free money, PPF wins. If you want higher return potential and more deduction (especially the ₹50,000 top-up and the new-regime employer lever), NPS wins. They're not either/or — a common plan is PPF for the tax-free core + NPS for the extra deduction and equity growth.
| PPF | NPS | |
|---|---|---|
| Deduction | ₹1.5 lakh under 80C | ₹1.5 lakh (80CCD(1)) + ₹50,000 (80CCD(1B)) + employer up to 14% (80CCD(2)) |
| Works in new regime? | No (deduction is old-regime) | The employer 14% (80CCD(2)) works in the new regime |
| Returns | ~7.1% fixed, government-set | Market-linked (equity/debt mix) — historically higher, with risk |
| Maturity tax | Fully tax-free (EEE) | 60% lump sum tax-free; 40% buys an annuity whose pension is taxable |
| Lock-in | 15 years (partial from year 7) | Till age 60 (limited partial withdrawals) |
| Liquidity/flexibility | Higher | Lower (retirement-focused) |
In the 30% slab, ₹1.5 lakh in either saves ~₹46,800. But NPS lets you deduct an extra ₹50,000 (another ~₹15,600 saved) that PPF can't — see 80CCD(1B). And on the new regime, PPF gives no deduction at all, while employer NPS (14%) is the single biggest surviving lever — see employer NPS.
PPF interest is reviewed quarterly by the government. NPS added Vatsalya (for minors) and the employer-NPS limit is 14% for all employees under the new regime — check the latest circulars in our notifications section.
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