Difference Between National Pension System (NPS) & Public Provident Fund (PPF)

In India, NPS (National Pension System) and PPF (Public Provident Fund) are the most common investment options. However, when it comes to interest rates, the flexibility offered, returns generated, investors get confused between the two. So, if you are a first-time investor and not sure where to invest your hard-earned money, you must understand the differences between the two and make an informed decision. 

PPF is a government-backed small savings scheme that provides fixed returns set by the government every quarter. It is an ideal investment choice if you are looking for a low-risk instrument that offers fixed and assured returns. 

NPS is a voluntary contribution-based pension savings scheme backed by the Government of India. It offers a pension during your old age and secures your post-retirement life. 

Now that you know what PPF and NPS are, let us understand the differences between these savings schemes. 


When you invest in any instrument, you should consider the safety of your capital, especially if you are investing for retirement or to accomplish any specific goal. Investments in PPF and NPS are safe. However, the degree of safety varies. 

Since PPF is a fixed return investment instrument, you get guaranteed returns. Government uses the funds from the PPF pool, making investing in such schemes very safe. 

On the other hand, NPS functions differently. It is a market-linked scheme, and the returns greatly depend on the funds’ performance and market movements. When you invest in NPS, you have the flexibility to allocate the funds in different asset classes and also decide the percentage of contribution in each asset class. If you invest the majority of the funds in equity-related funds, the risk may be high, but the returns potentials are also high. 

Returns generated

Government of India decides the PPF interest rates, and it remains unchanged irrespective of the market condition. The PPF interest rates generally range between 7-8%. It is better to stay invested for at least 15 years or more to get valuable returns. 

NPS is a market-linked retirement plan, and its returns greatly depend on the performance of the funds in your portfolio and the market movements. If you have a higher exposure to the equity market, you are likely to get higher returns in the long term. However, equity investments are high-risk.

If you are looking for more secure investment opportunities and get fixed and steady returns, you can invest a maximum amount in debt or balanced funds. 

Contribution amount

When you open a PPF account with a bank or post office, you can contribute a minimum of ₹500 and a maximum amount of ₹1.5 lakhs in a year. 

On the other hand, for an NPS account, the minimum contribution per year is ₹6000, and there is no cap on the maximum investment. 

Withdrawal rules

PPF investments have a maturity term of 15 years, which you can extend in the block of five years. PPF allows partial withdrawals after five years of opening the account, and the maximum amount you can withdraw is 50% of the balance in your account in the preceding financial year. 

NPS is a retirement plan, and hence premature withdrawals are discouraged. It matures when you react 60 years. But you can extend the account for ten more years. After three years from starting the account, NPS only allows three partial withdrawals for specific purposes, such as child education or marriage. NPS also has a cap on the maximum amount you can withdraw, i.e., 25% of the accumulated corpus. 

Final Word

Thus, both PPF and NPS have unique features and benefits. PPF is all about safety with steady returns. In contrast, NPS secures your post-retirement life and gives you inflation-adjusted returns. You can invest in any instrument to suit your risk appetite and financial goals or invest in both and get the best of both worlds.