NPS vs PPF vs ELSS Calculator

Three instruments that are taxed in three different ways

The National Pension System, the Public Provident Fund and Equity Linked Savings Schemes are routinely presented as interchangeable "80C tax savers". They are not. They differ on the one thing that decides how much money you actually end up with: how the maturity proceeds are taxed. Comparing their headline returns while ignoring that is the single most common mistake investors make, and it can be worth several lakh rupees over a working life.

PPF is the simplest. It is exempt at every stage — the contribution is deductible, the interest each year is tax-free, and the maturity amount is tax-free. Nothing you earn inside PPF is ever taxed. In exchange you accept a government-set rate that is usually the lowest of the three and a 15-year lock-in.

ELSS is an equity mutual fund with the shortest lock-in of any tax-saving instrument — just three years on each year's investment. Its growth is not taxed year to year, but when you redeem, the gain is taxed as an equity long-term capital gain: 12.5% on the gain above a ₹1,25,000 annual exemption under Section 198. Because it is pure equity, its expected return is the highest of the three, and also the most uncertain.

NPS is the most complicated at exit, and that complexity is where people get caught. Your money grows tax-free while invested, but at retirement the corpus is split. Up to 60% can be taken as a tax-free lump sum. The remaining 40% must compulsorily be used to buy an annuity, and the pension that annuity pays is taxed as ordinary income at your slab, year after year, for the rest of your life. So a large part of the NPS corpus is neither tax-free nor even fully yours to deploy — it is locked into a pension product and then taxed as it pays out.

This calculator exists to make those three tax treatments visible side by side. It grows the same annual investment in each at the return you choose, then applies each instrument's real maturity tax, so the figures you compare are what you would actually keep, not what the brochure return implies.

The new-regime cliff: none of these saves tax there

Before comparing returns at all, there is a prior question that changes everything: which tax regime are you in? The deductions that make PPF, ELSS and NPS "tax-saving" — the ₹1.5 lakh deduction for PPF and ELSS contributions under Section 123, and the additional deduction for NPS — exist only in the old regime. In the new regime, which is now the default, none of these three reduces your tax by a single rupee.

This matters more than most people realise. If you are on the new regime and investing in PPF or ELSS or NPS "to save tax", you are not saving any tax. You may still want the instrument for its return or its discipline, but the tax rationale has vanished, and the honest comparison is simply which one grows your money best after maturity tax — a pure returns race.

The calculator makes this explicit. Switch the regime toggle to "new" and the NPS extra-deduction row reads "nil in the new regime", and a red box tells you plainly that the tax-saving case has disappeared. If tax saving is genuinely your reason for locking money away for years, you need to be in the old regime for any of it to count, and that itself is a decision with its own arithmetic — the old regime's deductions have to beat the new regime's lower rates and larger standard deduction under Section 19 before the question of NPS versus PPF versus ELSS even arises.

A great many salaried investors are quietly paying for lock-ins that no longer buy them anything, because they moved to the new regime but kept the old habit. If that is you, this page will show it in one toggle.

How NPS is really taxed at exit, and why it drags

The NPS number is the one this calculator works hardest to get honest, because the marketing around NPS leans heavily on its extra deduction and quietly on the exit. Here is what actually happens at age 60.

The corpus is split. Up to 60% can be withdrawn as a lump sum, and that lump sum is exempt from tax — this is genuinely attractive. But the remaining 40% is compulsorily annuitised: you must use it to buy an annuity from a life insurer, and you cannot take it as cash. The annuity then pays you a pension, and that pension is fully taxable as income at your slab in the year you receive it, every year.

So two things reduce the real value of the NPS corpus relative to its headline size. First, 40% of it is illiquid — it is locked into a pension product at whatever annuity rate prevails when you retire, which historically has been modest. Second, that 40% is taxed on the way out, not tax-free like PPF. The calculator values the annuity portion after one equivalent of your retirement marginal rate, as a transparent proxy for the lifetime tax on the pension stream. That is an approximation — the real tax depends on your slab each year in retirement, which may be lower — and the page says so. But it is far closer to the truth than treating the whole NPS corpus as if it were a tax-free lump like PPF.

This is why, on many realistic inputs, NPS trails PPF and ELSS on pure after-tax value despite assuming a higher return: the forced, taxed annuity gives back much of the advantage. NPS earns its keep through the extra deduction on the way in, not through a superior exit — which is exactly the trade the next section quantifies.

PPF: boring, exempt, and capped at ₹1.5 lakh

PPF's appeal is certainty. The rate is set by the government each quarter and the return is guaranteed, the interest and maturity are entirely tax-free, and the sovereign backing means there is no credit risk at all. For the risk-free portion of a long-term plan it is hard to beat, and its exempt-exempt-exempt status means the number this calculator shows for PPF is the number you keep — there is no maturity tax to subtract.

Its two constraints are the lock-in and the ceiling. Money is locked for 15 years, with limited partial withdrawals allowed only from the seventh year, so PPF is genuinely long-horizon money. And you cannot contribute more than ₹1,50,000 in a financial year across all your PPF accounts — a statutory ceiling, not a preference.

The calculator enforces that ceiling. If you enter an annual investment above ₹1,50,000, it caps the PPF figure at the legal limit while letting NPS and ELSS take your full amount, and it flags in the box exactly how much of your intended investment PPF cannot absorb. This is important because a lot of comparisons quietly let PPF "invest" ₹2.5 lakh a year, which is not legally possible and flatters PPF against the other two. For any amount you want to invest above ₹1.5 lakh a year, PPF is simply not an option for the excess, and the real choice for that slice is between ELSS and NPS.

ELSS: the shortest lock-in, and a hidden exemption lever

ELSS is the equity option, and it carries both the highest expected return and the highest uncertainty of the three. Its structural advantage is liquidity: each year's investment is locked for only three years, against 15 for PPF and until age 60 for NPS. That makes ELSS the most flexible tax-saving instrument by a wide margin.

Its tax treatment is equity long-term capital gains. When you redeem units held over a year, the gain is taxed under Section 198 at 12.5%, but only on the portion of your long-term equity gains above ₹1,25,000 in the financial year. That annual exemption is a lever most investors leave unused. If you redeem your ELSS in staggered tranches across several financial years rather than all at once, you can shelter ₹1,25,000 of gain each year, and a patient investor can bring a large part of a big gain out entirely tax-free over time.

The calculator applies the exemption to the whole gain in one figure, which is the conservative, single-redemption case. In practice, spreading redemptions can push the ELSS after-tax number higher still — a point worth remembering when the ELSS figure is already close to or ahead of the others. The trade-off, always, is that ELSS is real equity: the return you assume may not arrive, and over short horizons it can be negative. The calculator takes your return as an assumption precisely because no one can promise it.

The extra NPS deduction: what it is really worth, and its catch

NPS has one genuine, unique tax advantage, and the calculator isolates it rather than letting it hide inside a blended return. PPF and ELSS both draw on the same ₹1.5 lakh deduction bucket — use it on one and you have less of it for the other. NPS offers an additional deduction of up to ₹50,000 (formerly Section 80CCD(1B)) that sits on top of that shared bucket, plus, for salaried employees, a further deduction on the employer's NPS contribution that no other instrument can match.

That extra ₹50,000 deduction is real money. At a 30% marginal rate it saves ₹15,600 including cess, every year, that you would otherwise pay in tax. The calculator shows what that saving grows to if you invest it each year at the NPS return — over a long horizon it compounds into a meaningful sum, and it is the honest like-for-like edge NPS holds over PPF and ELSS.

The catch is everything the previous sections described: to capture that deduction you accept the lock to age 60, the compulsory 40% annuity, and the tax on the pension. So the real question NPS poses is a trade — is the extra deduction, compounded, worth more than the value given up to the forced, taxed annuity? The calculator answers it directly. When NPS wins, the box tells you whether it won on merit or only because of the deduction; when it loses, it tells you by how much and reminds you the deduction is still there to weigh. That is the decision, stated in rupees, instead of a slogan.

How to read this calculator without fooling yourself

The most important discipline with a comparison like this is honesty about the inputs, because the ranking is driven almost entirely by two assumptions you control: the returns and the retirement slab. It is easy to make any of the three "win" by being generous to it. Use returns you actually believe — a realistic equity assumption for ELSS and NPS, the current government rate for PPF — and set your retirement slab to your honest expectation rather than to whatever produces the answer you already wanted.

Treat the three figures as after-tax corpus, not as directly spendable cash. PPF and the 60% NPS lump are liquid at maturity; the 40% NPS annuity is not, and ELSS is liquid throughout after its three-year lock. Two instruments can show a similar number and be very different in what you can do with the money, and liquidity has real value that a single figure cannot capture.

Finally, remember what this tool is and is not. It is a tax computation under your own assumptions — a way to see how three different tax treatments play out on the same money. It is not investment advice, it does not know your risk tolerance or your other assets, and it cannot tell you what any market-linked instrument will return. The right use is to bring the numbers, and the trade-offs they reveal, to a conversation with your accountant or adviser, who can fit them to your whole financial picture.