The National Pension System (NPS) and Public Provident Fund (PPF) are government-backed pension schemes offering tax deductions and benefits. NPS is a market-linked pension savings vehicle offering returns based on the fund managers’ performance, while PPF provides fixed returns set by the government every quarter. Both schemes are popular for retirement planning due to their tax benefits, safety, and long-term growth potential.

NPS allows individuals to contribute until they are 60. It invests the funds in various asset classes for portfolio growth. PPF, on the other hand, is a long-term savings scheme with guaranteed returns. Its contributions are eligible for tax deductions, and the interest earned and maturity amount are tax-free. NPS and PPF provide a secure retirement savings option, allowing individuals to build a robust portfolio while enjoying tax advantages and financial security in their retirement years.

Liquidity: PPF allows partial withdrawals from the 7th year, with full withdrawal after the maturity period of 15 years. NPS permits a lump sum withdrawal (up to 60 per cent) at retirement; the rest must be invested in a pension annuity. Both policies offer flexibility during the investment period.

Also Read: When Can You Withdraw Funds From Your PPF Account?

Premature Closure: PPF allows premature closure from the 7th year, with complete withdrawal after 15 years. NPS permits partial withdrawals before retirement only for specific purposes like education or medical expenses, subject to certain conditions. Full withdrawal from NPS is allowed only at retirement or under exceptional circumstances like a terminal illness.

Tax Benefits: Both PPF and NPS offer tax benefits. PPF contributions are exempt from tax at the time of investment, during the tenure, and on maturity. NPS contributions qualify for deductions under Section 80C, up to Rs 1.5 lakh in a financial year and an additional Rs 50,000 under Section 80CCD (1B).

Also Read: PPF Vs NPS: Which Is A Better Retirement Savings Option For You?

Frequency of Contributions: PPF allows contributions in lump sums or instalments, with a minimum annual contribution of Rs 500 and a maximum of Rs 1.5 lakh. NPS allows regular or lump sum contributions, with a minimum annual contribution of Rs 1,000. There is no upper limit on contributions, but tax benefits are limited to Rs 2 lakh in a financial year.