EPF, PPF and NPS: Three Retirement Accounts, Three Different Jobs
If you are salaried, a retirement account is already filling up every month whether you think about it or not. Here is what it will add up to, and what PPF and NPS can do that EPF cannot.
Figures checked · How we calculate
₹22,441a month, in today's money: what EPF alone pays a 30-year-old on ₹50,000 basic pay when they retire at 60
₹50,000 basic pay, rising 8% a year, 12% from you and 12% from your employer, earning 8.25%. At 60, the EPF balance is ₹3.87 crore. In today's rupees, at 6% inflation, that is ₹67 lakh, and drawing 4% of it a year pays ₹22,441 a month. Your basic pay at 59 would be worth about ₹86,000 a month in today's rupees.
The three accounts side by side
| EPF | PPF | NPS | |
|---|---|---|---|
| Who can open it | Salaried employees, through the employer | Any resident individual | Any citizen aged 18 to 70 |
| What it earns | 8.25% for 2025-26, set each year | 7.1% for October to December 2026, set each quarter | Market returns; up to 75% in equity |
| How long it is locked | Until retirement, with partial withdrawals allowed | 15 years, with partial withdrawals from year 7 | Until 60, or 15 years in the scheme |
| Tax on what you put in | Deduction only in the old regime | Deduction only in the old regime | Employer's share deductible in both regimes |
| Tax on what comes out | Tax-free after five years' service | Tax-free | 60% tax-free; the annuity is taxed as income |
Under the new tax regime, the default since 2023, only one of these deductions survives: your employer's contribution to NPS.
EPF: less of your employer's 12% reaches your account than you think
You put in 12% of your basic pay and dearness allowance. Your employer puts in 12% too, but if you are in the Employees' Pension Scheme, which most employees are, 8.33% of your pay up to a ceiling goes to the pension instead.
That ceiling rose from ₹15,000 to ₹25,000 a month on 17 September 2026, the first change since 2014. So the pension now takes up to ₹2,083 of your employer's contribution each month, up from ₹1,250. On ₹50,000 basic pay:
| Each month | To EPF | To the pension (EPS) |
|---|---|---|
| From you, 12% | ₹6,000 | — |
| From your employer, 12% | ₹3,917 | ₹2,083 |
| Total | ₹9,917 | ₹2,083 |
The pension pays a monthly amount from 58, based on your service and a capped salary. It is not a lump sum and is not part of your EPF balance.
Run your own numbers in the provident fund calculator, which now takes the pension share out of your employer's contribution.
The rules that catch people out:
- Interest on large contributions is taxed. If what you put in, including any voluntary extra, exceeds ₹2.5 lakh a year, the interest on the excess is taxable. At 12%, that starts at a basic pay of about ₹1.74 lakh a month.
- Leaving before five years is taxed. Withdraw your balance before five years of continuous service, across employers if you transferred it, and it is taxed as income.
- Transfer it when you change jobs. Your UAN carries across employers, and transferring the balance keeps your five years of service continuous for tax. An old balance left behind still earns interest, but it is easy to lose track of, and the service clock may not carry over.
EPFO's board approved simpler partial withdrawal rules in October 2025, folding thirteen reasons for withdrawal into three. Check the EPFO portal for the rules in force before you apply.
PPF: the tax-free account for anyone without EPF
PPF pays 7.1% a year, set by the government each quarter and unchanged since 2020. You can put in ₹500 to ₹1.5 lakh a year. The account runs 15 years and can be extended in blocks of five. Interest and maturity are both tax-free.
That makes it the obvious debt account for the self-employed, and for anyone in the old tax regime with room left in the ₹1.5 lakh Section 80C limit. For a salaried person, there is often a better home for the same money: the Voluntary Provident Fund, extra contributions to your own EPF, earns 8.25% instead of 7.1%, with the same tax-free status up to the ₹2.5 lakh limit.
- Voluntary Provident Fund at 8.25%₹45.0 LSalaried only. Tax-free while your total EPF contribution stays within ₹2.5 lakh a year.
- PPF at 7.1%₹40.7 LOpen to anyone. Tax-free with no limit beyond the ₹1.5 lakh a year you may put in.
- VPF instead of PPF₹4.3 LThe difference over 15 years, for the same ₹22.5 lakh paid in.
- An equity index fund, if it earns 12%₹62.6 LAn assumption, not a rate anyone sets. It can fall, and gains above ₹1.25 lakh a year are taxed at 12.5% when you sell.
Rates held constant. PPF and EPF rates are reset every quarter and every year respectively; the equity figure is an assumption, not a promise, and can be far lower over any fifteen years.
NPS: the one deduction left in the new tax regime
NPS invests in equity, corporate bonds and government bonds, in a mix you choose or one that shifts towards bonds as you age. Its value is market-linked, so it can fall.
Its strongest feature for a salaried person is tax. If your employer pays into NPS for you, up to 14% of your basic pay is deductible under the new regime. On ₹50,000 basic, that is ₹84,000 a year, which saves ₹26,208 for someone in the 30% bracket, every year, on top of the investment itself. Many employers offer this as a salary restructure. Ask HR.
Your own contributions get a deduction of up to ₹50,000 a year, but only in the old regime.
At 60, or after 15 years in the scheme, rules notified in December 2025 let private-sector subscribers take up to 80% as a lump sum. At least 20% must buy an annuity, a monthly pension from an insurer, which is taxed as income. Of the lump sum, 60% of the corpus is tax-free; whether the extra 20% is taxed has not been settled in the Income-tax Act, so check before you withdraw.
Which to use, in order
- EPF happens on its own. Do not withdraw it when you change jobs. Transfer it.
- Employer NPS, if offered. In the new regime it is the only deduction left, and it is worth up to 14% of your basic pay in deductions.
- VPF or PPF for more safe savings. VPF if salaried, PPF if self-employed or if you want money you control outside your employer.
- Equity index funds for growth. EPF and PPF will not beat inflation by much over thirty years. The equity part of your plan has to come from somewhere else. The SIP planning guide sets the amount.
Questions people actually ask
Is EPF interest taxable? Not on contributions up to ₹2.5 lakh a year, after five years of continuous service. Interest on the part you contribute above ₹2.5 lakh is taxed every year.
Can I have both PPF and EPF? Yes. They are separate. Many salaried people use EPF as their main debt account and keep a PPF open at the minimum ₹500 a year as a second, tax-free account they can top up in good years.
Is NPS better than an equity mutual fund? For the part your employer pays, usually yes, because of the deduction. For your own money in the new regime, an equity index fund is simpler: no lock-in until 60, no annuity, and long-term gains taxed at 12.5% above ₹1.25 lakh a year.
What happens to my EPF if I stop working? It keeps earning interest until you turn 58, even with no new contributions, though interest earned after you stop working can be taxable. When you can withdraw it in full depends on how long you have been out of work; the rules were revised in October 2025, so check the EPFO portal before you apply.
Where do these figures come from? EPF rate: the 8.25% set by the EPFO's trustees for 2025-26 and ratified in June 2026. PPF rate: the government's notification for October to December 2026. The EPF wage ceiling: the 17 September 2026 notification under the Code on Social Security. The KeyNumber assumes 8% yearly raises, a constant 8.25% rate, and that you are in the pension scheme throughout.