EPF vs PPF vs NPS: how the three retirement schemes compare

The short answer

EPF (Employees' Provident Fund) comes with a job at an establishment covered by EPFO: you and your employer pay in every month, and the balance earns a rate declared for each year. PPF (Public Provident Fund) is a Central Government savings account that any adult resident Indian citizen can open: you put in ₹500 to ₹1,50,000 a financial year for at least 15 years, at a rate the government sets every quarter. NPS (National Pension System) is a pension account regulated by the Pension Fund Regulatory and Development Authority (PFRDA): a pension fund you choose invests your money in equity, bonds and government securities, its value moves with the markets, and at exit part of a larger balance must buy an annuity.

EPF and PPF credit a declared return; NPS gives you choices and no guaranteed return. From 1 April 2026 their tax treatment is set by the Income-tax Act, 2025, which replaced the Income-tax Act, 1961.

EPF, PPF and NPS side by side

EPF: the provident fund that comes with your job

EPF is run by the Employees' Provident Fund Organisation (EPFO) and now operates under the Code on Social Security, 2020. At an establishment EPFO covers, membership is compulsory on wages up to the statutory ceiling, raised from ₹15,000 to ₹25,000 a month with effect from 17 September 2026.

Each month you pay 12% of your EPF wages (broadly, basic pay and dearness allowance) and your employer pays 12%. Of the employer's share, 8.33% goes to the Employees' Pension Scheme (EPS) and the rest to your EPF account. EPFO's own example: on wages of ₹20,000 you pay ₹2,400, and your employer pays ₹1,666 to EPS and ₹734 to EPF.

Interest is worked out on the monthly running balance at the rate declared for each financial year. EPFO's Central Board of Trustees recommends the rate and the government notifies it: 8.25% for 2024-25, and on 2 March 2026 the Board recommended 8.25% for 2025-26. Credits show in your passbook on EPFO's member portal.

The full balance is paid when you retire, or as a final settlement after you have been out of work for a set period. Before that, partial withdrawals are allowed for specific needs. In October 2025 EPFO's Board decided to merge thirteen withdrawal rules into three groups (essential needs such as illness, education and marriage; housing; special circumstances), allow up to 100% of the eligible balance while 25% of contributions stays in the account, require only 12 months' service, and extend the wait for a premature final settlement after leaving a job from 2 months to 12. Check the rule on the claim form before you apply.

PPF: a 15-year government savings account

PPF is governed by the Public Provident Fund Scheme, 2019. An adult resident Indian citizen can open one account in their own name and one on behalf of each minor in their care; joint accounts are not allowed. Deposits of ₹500 to ₹1,50,000 a financial year can be made at once or in instalments, and the limit covers your own and any minor's account together.

The Ministry of Finance sets the rate every quarter. It is 7.1% a year for October to December 2026: the Ministry's office memorandum of 30 September 2026 kept all small savings rates unchanged, and PPF has earned 7.1% since 1 April 2020. Interest is worked out each month on the lowest balance between the close of the fifth day and the end of the month, and credited at the end of the financial year. A deposit made by the 5th therefore earns interest for that month; one made on the 6th does not.

The account matures fifteen full financial years after the end of the year you opened it in: one opened in June 2026 can be closed from 1 April 2042. You can then take the whole balance, keep the account without deposits, still earning interest, or extend it with deposits for five years at a time, choosing within a year of maturity.

Before maturity the money is reachable in three ways:

• a loan in the third to sixth financial years, of up to 25% of the balance at the end of the second preceding year;
• from the seventh financial year, one withdrawal a year, of up to half the lower of the balances at the end of the fourth preceding year and the preceding year;
• early closure after five years, only for life-threatening illness in the family, higher education or a change in residency, with interest recalculated at 1% less.

If you become a non-resident, an account you already hold can run to maturity but cannot be extended.

NPS: a market-linked pension account

NPS is regulated by PFRDA. Indian citizens, resident or non-resident, and Overseas Citizens of India aged 18 to 85 can open an individual account; Hindu undivided families and Persons of Indian Origin cannot. Tier I is the pension account, with withdrawal rules and tax benefits; an optional Tier II account can be withdrawn at any time but carries no tax benefit. There is no upper limit on contributions, and your employer may pay in too.

Contributions buy units in your pension fund's schemes, in a mix you set yourself (Active choice, up to 75% in equity in the common schemes) or one that follows your age (Auto choice, through life cycle funds that reduce equity as you get older). The value is your units times each scheme's NAV, so it moves with the markets; there is no declared rate.

PFRDA rewrote the exit rules in December 2025. For an individual account under the All Citizen Model:

• Normal exit is open at 60 or after 15 years, whichever comes first.
• At a normal exit you can take up to 80% as a lump sum and put at least 20% into an annuity. Up to ₹8 lakh in all, you may take everything, at once or in instalments; between ₹8 lakh and ₹12 lakh, up to ₹6 lakh at once and the rest over at least six years or as an annuity.
• Premature exit, before that point, allows up to 20% as a lump sum, with at least 80% into an annuity, unless the amount is ₹5 lakh or less.
• While you stay in, partial withdrawals are allowed after three years, of up to 25% of your own contributions, for purposes such as children's higher education or marriage, a first home (once) or medical treatment, up to four times before 60 and at least four years apart.

Government-sector subscribers keep a 60% lump sum and a 40% annuity at a normal exit.

How each is taxed in FY 2026-27

The Income-tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act, and calls the financial year the tax year. For FY 2025-26 and earlier years, the 1961 Act's provisions, such as sections 80C and 80CCD, still apply. Section numbers below are those of the 2025 Act as published in the Gazette.

Two regimes remain. The new regime (section 202, the counterpart of section 115BAC) applies unless you opt out; if you have no business income, you choose with your return each year. The old regime keeps most deductions.

Money you put in

• Section 123 (the counterpart of section 80C): your own EPF contribution, PPF deposits in your own, your spouse's or your children's names, and your own NPS contributions (up to 10% of salary for an employee) share one deduction of up to ₹1,50,000. Old regime only.
• Section 124(3) (the counterpart of section 80CCD(1B)): a further deduction of up to ₹50,000 for your own NPS contributions; the same rupee cannot count under both sections. Old regime only.
• Section 124(1) (the counterpart of section 80CCD(2)): your employer's NPS contribution, up to 10% of your salary (basic pay and dearness allowance), or 14% where the employer is the Central or a State Government. The new regime allows this one deduction, at 14% for everyone.

Interest and money paid out

• PPF: interest and the amount paid out are not taxed (Schedule II, the counterpart of section 10(11)).
• EPF: the balance paid to you is not taxed if you have five years' continuous service or if the job ended through ill-health, the employer's closure or another cause beyond your control (Schedule II with Schedule XI, the counterpart of section 10(12)). Interest on the part of your own contributions above ₹2,50,000 in a year (₹5,00,000 if your employer does not contribute) is taxable. Your employer's contributions to EPF, NPS and superannuation funds together above ₹7,50,000 a year are taxed as a perquisite (section 17(1)(h)).
• NPS: up to 60% of the amount paid on closure is not taxed (Schedule II, the counterpart of section 10(12A)), nor is a partial withdrawal of up to 25% of your own contributions (Schedule III, the counterpart of section 10(12B)). The annuity pension is taxed as income in the year you receive it. PFRDA now lets non-government subscribers take up to 80% as a lump sum, more than the 60% the Act exempts, so check how the part above 60% is taxed in the year you exit.

These exemptions apply under both regimes. A Finance Act can change any limit, so check the current position before relying on it.

What separates them in practice

There is no single answer to which is better, and they are not always alternatives: at a covered employer, EPF is compulsory on wages up to the ceiling. The main differences:

• Return: EPF and PPF credit a declared rate; NPS depends on the markets and your mix.
• Access: PPF is the most rigid in its first six years; EPF allows withdrawals for set needs; NPS allows 25% of your own contributions until you exit.
• At the end: EPF and PPF pay out the whole balance; NPS asks that part of a larger balance buy an annuity, whose pension is taxed.
• Tax: under the new regime, only the employer's NPS contribution brings a deduction.

To weigh them against your own income, regime and goals, speak to a SEBI-registered investment adviser or a tax professional.

Keeping all three in one view with FinLens

FinLens reads NPS statements and records EPF and PPF as balances you enter. Upload the transaction statement and the Statement of Holding from your central recordkeeping agency (CRA), and FinLens keeps a ledger of every contribution (employee, employer or voluntary) and unit movement, with value, gain, XIRR and charges for each tier, never counting overlapping statements twice. There is no EPFO passbook reader and no PPF reader: you type each balance with its date under Settings → Assets & loans, and it appears beside your NPS under PF & deposits and in your net worth, with no return figure. See NPS in FinLens and Investments.

Frequently asked questions

Sources

1. The Income-tax Act, 2025 (No. 30 of 2025), Gazette of India: sections 3, 17, 123, 124, 202 and 536, Schedules II, III, XI and XV
2. PFRDA: NPS for the All Citizen Model (eligibility, Tier I and II, investment choices, exit)
3. PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015, as last amended on 16 December 2025
4. National Savings Institute (Ministry of Finance): Public Provident Fund Scheme, 2019
5. Ministry of Finance, Department of Economic Affairs: interest rates for small savings schemes, Q3 of FY 2026-27 (30 September 2026)
6. PIB, Ministry of Labour and Employment: 239th meeting of EPFO's Central Board of Trustees (2 March 2026)
7. PIB, Ministry of Labour and Employment: 238th meeting of EPFO's Central Board of Trustees (13 October 2025)
8. EPFO: FAQs on the revision of the wage ceiling to ₹25,000 (September 2026)