PPF pays a government-set 7.1% for Q2 FY 2026-27, is exempt from tax at every stage, and locks your money for 15 years. NPS is market-linked with no guaranteed return, runs to age 60, and — since an amendment gazetted on 16 December 2025 — lets a non-government subscriber take up to 80% of the corpus as a lump sum, with a minimum 20% annuity, instead of the long-standing 60/40 split.
That change matters more than any return comparison, because the forced annuity was always the strongest objection to NPS. It is also the thing most comparisons online still have wrong.
The honest verdict up front: these two are not substitutes. PPF is a guaranteed, tax-free, medium-horizon debt holding. NPS is a low-cost, market-linked, retirement-locked wrapper whose single best feature for a salaried employee is the deduction on the employer’s contribution. Most people are better off holding both, for different reasons.
The December 2025 exit change, and who it applies to
The PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025 were signed on 12 December 2025 and gazetted on 16 December 2025, taking effect from publication. A lot of coverage dates the change to 19 December, which is when PFRDA issued its press release — not when the regulations came into force.
What changed, for non-government subscribers (the All Citizen Model and corporate NPS):
- On a normal exit, the minimum annuity share is now 20% of the corpus, so up to 80% may be taken as a lump sum.
- Corpus tiers were revised. Up to ₹8 lakh, the whole amount can be withdrawn with no annuity purchase at all, or drawn down systematically. Above ₹8 lakh and up to ₹12 lakh, up to ₹6 lakh may be taken as a lump sum with the balance drawn down over at least six years. Above ₹12 lakh, the 80/20 rule applies.
- The five-year minimum subscription period before a premature exit was removed for the All Citizen Model. The premature split still runs the other way — at least 80% into an annuity, up to 20% as a lump sum — but full withdrawal is now permitted up to ₹5 lakh.
- Vesting for the All Citizen Model is now 15 years of subscription or age 60, whichever comes earlier, and the maximum exit age was raised to 85.
The qualifier that most pages drop: government sector subscribers were not covered by this amendment. Their normal exit split remains 60% lump sum with a 40% minimum annuity share. If you are a central or state government employee in NPS, the headline “NPS now allows 80%” does not describe your account.
A further amendment was gazetted on 20 July 2026, but it changes no percentage or threshold. Because all of this is recent and widely misreported, confirm your own position on the PFRDA site before planning around it, rather than relying on any secondary source — including this one.
Returns: known rate versus no guarantee
| PPF | NPS | |
|---|---|---|
| Return | 7.1% for Q2 FY 2026-27, set by the Ministry of Finance | Market-linked, no guarantee |
| Who decides | Government, revised each quarter | You, via the equity/debt mix |
| Certainty | Rate is guaranteed while notified, but resets quarterly | None, in either direction |
| Term | 15 years, extendable in 5-year blocks | To age 60, or 15 years’ subscription if earlier |
PPF’s rate is notified quarterly, on 1 April, 1 July, 1 October and 1 January. Small savings rates have been unchanged since April 2024. The important nuance is that PPF is not a fixed-rate product: unlike SCSS or a bank deposit, where the rate on the day you open is the rate you keep, your PPF balance earns whatever rate is notified for each quarter it sits there. Over a 15-year account you will live through many notifications.
NPS has no rate to quote. You choose an allocation across equity, corporate debt, government securities and alternatives, either yourself or through a lifecycle option that de-risks with age, and your return is whatever those assets deliver minus fund management charges that are very low by the standards of pooled products in India. Over a 25-year horizon, an equity-tilted NPS account has a reasonable prospect of beating 7.1% by a wide margin. It also has a real possibility of doing worse over any particular decade, and no one is obliged to make up the difference.
Treat any page projecting an NPS “maturity value” at 10% or 12% as illustrative arithmetic, not a forecast. Our NPS calculator works the same way: it shows what a chosen assumption produces, not what you will get. The PPF calculator is different in kind, because the current rate is a published figure rather than an assumption.
One small mechanical point that costs real money in PPF: interest is calculated on the lowest balance in the account between the 5th of the month and the month end. Deposit on or before the 5th. A ₹1.5 lakh lump sum paid in on the 6th of April earns nothing for that month.
Lock-in and getting at the money
PPF runs 15 years, and the maturity date is the end of the fifteenth financial year after the year of opening, which is usually a few months later than people expect. Before then:
- Loan against the balance is available from the third year to the sixth. It is a loan, with interest, repayable within a prescribed period, and limited to a proportion of the balance.
- Partial withdrawal becomes available from the seventh year, again capped as a proportion of the balance.
- Premature closure is permitted only in narrowly defined circumstances and after a minimum period, with an interest penalty.
At maturity you can withdraw everything, or extend in five-year blocks with or without further contributions. Confirm the current withdrawal and loan proportions on the National Savings Institute page — they are scheme rules that can be amended by notification.
NPS Tier I is locked until you exit, and the exit routes are the ones above. Partial withdrawal is permitted before 60, and this also changed in the 2025 amendment: four times before 60, with a four-year interval between withdrawals, and after 60 there is no frequency cap but a three-year interval applies. Two purposes that used to qualify — skill development or re-skilling, and establishing a venture or start-up — were removed by the amendment. If you were counting on funding a business from your NPS account, that door has closed.
The practical difference: PPF gives you usable liquidity from year seven without ending the account. NPS gives far less, deliberately, because it is a pension product rather than a savings account. NPS Tier II, which is optional and unlocked, is not comparable to either — it carries none of Tier I’s tax treatment for most subscribers.
Tax: where the real difference lies
PPF is EEE — the contribution is deductible, the interest is exempt, and the maturity proceeds are exempt.
The catch is that the deduction, long known as section 80C, is available under the old regime only, sharing a ₹1.5 lakh ceiling with life insurance premiums, home loan principal and the rest. For a new-regime taxpayer, a PPF deposit gives no deduction at all.
A word on the section numbers used below. The Income-tax Act, 2025 took effect on 1 April 2026 and repealed the Income-tax Act, 1961, carrying the new regime over as the default. The reliefs survived the change; their numbering did not. 80C, 80CCD(1), 80CCD(1B) and 80CCD(2) are labels from the repealed Act, still used by employers, payroll systems and the schemes themselves. We could not read the corresponding provisions of the 2025 Act — the department’s site refuses automated requests — so the familiar labels are used here rather than a guess at the new ones.
PPF still justifies itself on the second and third E. A 7.1% return exempt from tax on both interest and maturity is equivalent, for someone taxed at 30% plus 4% cess, to a taxable deposit paying about 10.3% — that person keeps 68.8 paise of every rupee of taxable interest, so it takes 10.3% to leave 7.1% behind. Almost nothing else in the guaranteed-return space does that. Work your own bracket through the income tax calculator and the comparison in old vs new tax regime before deciding.
NPS has three separate deductions and they behave very differently:
- 80CCD(1) — your own contribution, within the ₹1.5 lakh 80C ceiling. Old regime only.
- 80CCD(1B) — an additional deduction for NPS, over and above that ceiling. Old regime only. We could not verify the current cap, so confirm it on the income tax portal rather than taking a figure from a blog.
- 80CCD(2) — your employer’s contribution. This one survives under the new regime, and it is the reason NPS remains interesting to a salaried employee who has moved to the new regime.
The 80CCD(2) cap is the detail that is most often conflated. It is 14% of salary under the new regime, but only 10% for private-sector employees under the old regime. Government employees get 14% either way. So for a private-sector employee on the new regime, routing part of the CTC into an employer NPS contribution is the rare deduction that has actually become more generous, not less.
Two warnings on the exit side.
First, the annuity income is taxable. The lump sum may be exempt, but the pension the annuity pays you each year is taxed as income in the year you receive it, at your slab rate. Comparisons that call NPS “tax free at maturity” are describing one half of the exit.
Second, and more importantly: do not assume the full 80% lump sum is tax free. The exemption for the exit lump sum is framed as 60% of the corpus, and the NPS Trust still states 60%. The regulations now permit 80% for non-government subscribers, and we could find nothing confirming the exemption was raised to match. The extra 20% may well be taxable. This is unresolved, and until it is clarified, plan on the conservative reading and take professional advice before drawing the lump sum.
How much you can put in
PPF is capped at ₹1.5 lakh a year across all accounts you hold, with a minimum of ₹500 to keep the account active. That ceiling is the scheme’s biggest structural limitation: it cannot be the whole of a serious retirement plan for a high earner, because it simply will not absorb enough money.
NPS has no comparable ceiling on what you may contribute. The limits are on what is deductible, not on what you may invest. Someone who wants to direct a large amount towards retirement can do it in NPS and cannot in PPF.
Neither can hold everything. If you have exhausted PPF and want more guaranteed, tax-favoured room, the other small savings options and their own ceilings are set out in post office savings schemes, and a daughter under 10 opens up a separate ₹1.5 lakh limit under Sukanya Samriddhi.
Which one suits you
PPF fits someone who wants a guaranteed, tax-free return with sovereign credit risk and nothing else; who has a 15-year horizon but wants a door open from year seven; who is self-employed or without an employer NPS facility; or who is on the old regime and using 80C anyway. It also suits the risk-averse portion of anyone’s portfolio, regardless of age.
NPS fits a salaried employee whose employer offers a contribution — take it, because 80CCD(2) is the one meaningful NPS deduction that survives the new regime — as well as anyone who wants equity exposure inside a very low-cost wrapper, anyone who needs to save more than PPF’s ceiling allows, and anyone who values being unable to touch the money before 60 as a feature rather than a cost.
Neither fits money you might need within a few years. PPF’s first partial withdrawal is years away and NPS is a pension account. That money belongs in a deposit or a liquid instrument.
The choice is rarely either/or. A workable default for a salaried person on the new regime: take the full employer NPS contribution available to you, since it is the only part of NPS that is still tax-advantaged for you; hold PPF for the guaranteed slice of long-term savings, funded on or before the 5th of each month; and stop treating the two as competitors for the same rupee. PPF answers “where do I put money I must not lose”. NPS answers “how do I fund a retirement 25 years out”. Those are different questions, and only one of them has a guaranteed answer.
Common questions
Can I really take 80% of my NPS corpus as a lump sum now?
If you are a non-government subscriber — the All Citizen Model or a corporate NPS account — yes. The PFRDA amendment gazetted on 16 December 2025 sets the minimum annuity share at 20% of the corpus on a normal exit, so up to 80% can be taken as a lump sum. Government sector subscribers were not covered by the change and their split is unchanged. Confirm your own position on the PFRDA site before planning around it, because the rule is recent and much published guidance still describes the superseded position.
Is the whole 80% lump sum tax free?
We cannot confirm that it is, and no one should tell you otherwise. The exemption for the NPS exit lump sum is written as 60% of the corpus, and the NPS Trust still states 60%. The regulations now permit 80% for non-government subscribers, but nothing we could find confirms the tax exemption was raised to match. Until that is clarified, treat the portion above 60% as potentially taxable and ask your assessing officer or a chartered accountant before you draw it.
Should I stop PPF if I am on the new tax regime?
Not automatically. The deduction on PPF contributions — the one everyone still calls section 80C, after the repealed 1961 Act — is available under the old regime only, so a new-regime taxpayer gets nothing at the deposit stage. What survives is the return itself: 7.1% for the current quarter, exempt from tax on both the interest and the maturity proceeds. For someone in the 30% bracket paying 4% cess, a taxable deposit would need about 10.3% before tax to match that. PPF stops being a tax-saving instrument under the new regime and becomes simply a good tax-free debt holding.
Which gives a bigger retirement corpus, NPS or PPF?
Nobody can answer that honestly in advance. PPF pays a rate the Ministry of Finance notifies each quarter — currently 7.1%, and unchanged across the small savings family since April 2024 — which is known but not fixed for your whole term. NPS returns depend on the equity, corporate debt and government securities mix you choose and on what markets do over decades. An equity-tilted NPS account has historically been the more likely to end larger, with a real possibility of ending smaller. Anyone projecting an assured NPS figure is guessing.
Can I have both, and how should I split between them?
Yes, and most salaried people should. They serve different jobs: PPF is the guaranteed, tax-free part of your debt allocation with a 15-year horizon and usable liquidity from year seven; NPS is the retirement-locked, market-linked part. A common sensible shape is to take the full employer NPS contribution your employer offers, since the deduction for it survives under the new regime, then use PPF for the guaranteed portion of long-term savings, up to its ₹1.5 lakh annual ceiling.
Sources
Rates and rules on this page were read directly from the following sources on the dates shown. Figures change — if you are about to act on one, confirm it at the source.