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Seven factors to determine the best savings scheme – EPF, PPF or NPS?

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savings schemes

EPF (Employee Provident Fund) and PPF (Public Provident Fund) have been the most talked about investment products/savings schemes in the past decade. The reasons could be many – Tax free returns, Tax deduction for invested amount, Fixed returns and so on. There is another product which has joined this fight and made it a triangular contest. It is called NPS or New Pension Scheme.

The entry of NPS has made the ‘best savings scheme’ contest really interesting. If you were to choose one of these as a long term investment (at least 15 years), which one would you choose? What factors would make you choose one of these? This is exactly what we would be looking at now. Here is a comparison of these schemes based on six factors.

Employee provident fund (EPF)

This has been the darling of every employee till now. Employees are always interested in knowing more and more about this scheme. Be it EPF balance, withdrawal or transfer, every employee wants to know the ins and outs of this popular retirement scheme.

  • Tax deduction available – Up to Rs. 1 lakh under section 80C
  • Maximum Contribution allowed – Up to 100% of (basic + da)
  • Returns – 8.5%
  • Cost – Nil
  • Liquidity – Withdrawals allowed for certain instances like marriage, children’s education, construction of house/flat and so on.
  • Tenure – Up to 60 years of age
  • Taxation – Taxable as per tax slab if withdrawn before 5 years of service
  • Purpose – Retirement corpus, Pension (EPS) and Insurance (EDLI)

(Also see: EPF vs PPF – Which is better?)

Public Provident Fund (PPF)

Primarily a post office scheme, PPF has now become a popular financial product which is sold across nationalized banks. Though not a mandatory scheme for employees, it has gained popularity due to it’s tax free steady returns in the past decade or so.

  • Tax deduction available – Up to Rs. 1 lakh under section 80C
  • Maximum Contribution allowed – Up to Rs. 1 lakh
  • Returns – 8.7%
  • Cost – Nil
  • Liquidity – Partial withdrawals allowed from 6th year onwards
  • Tenure – 15 years, with option to extend for blocks of 5 years unlimited times.
  • Purpose – Retirement corpus, Children’s marriage/education

(Also  see: NPS vs EPF)

New Pension Scheme (NPS)

Here is a new comer in the market with a different strategy. For all those who wanted EPF to have exposure to equities, NPS can now do that for you. You can also pick your fund manager from the given options. It is not just restricted to the employees but caters to even the self employed class.

  • Tax deduction available – Up to 10% of (basic+da) under Section 80CCD within the Rs 1 lakh limit. Employer’s contribution up to 10% of (basic+da) under Section 80CCE.
  • Maximum Contribution allowed – NA
  • Returns – 6-12% depending on type of scheme
  • Cost – Fixed cost of Rs. 470 per year
  • Liquidity – Withdrawals available for Tier-II funds.
  • Tenure – Up to 60 years of age
  • Purpose – Retirement corpus, Pension


In terms of tax benefits and liquidity, PPF seems to be better than the rest. However, EPF offers you the benefit of employer’s contribution up to 12% of your basic, which actually doubles the saving. If you are keen on having equity exposure to your retirement kitty, NPS seems to be the only option here. NPS returns have not been impressive yet, but being a long term product, equity exposure should boost the returns later. All 3 products have proved to be quite good and there is no harm in holding all of these depending upon your need.




  • gowrimanju

    I am an IT assessee.I am assessed in two status.One individual and another as HUF.I am having PPF a/c in my individual name and invested to the maximum and claiming under sec.80c. Now I want to open a PPF a/c in my minor daughter’s mame mother as guardian.Can I claim expemption under sec.80c.Pl.give your advice by email if possible.
    with kind regards.

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