This Article was fact checked and last updated for accuracy on July 17, 2025 by Mani Karthik
When I moved back from the US in 2017, my biggest worry wasn’t the traffic in Bangalore.
It wasn’t even the power cuts.
It was securing my family’s financial future in India.
My wife kept asking me the same question every week. “Mani, are we making the right financial choices here?”
She had valid concerns. We had built a decent 401k in America. But now we were starting from scratch in India.
That’s when I dove deep into NPS vs PPF. Two schemes that every NRI should understand before moving back.
Today, I’ll break down everything you need to know. With real data. Personal experiences. And zero marketing fluff.
Why This Matters for NRIs 📊
Let me be honest with you.
When I first heard about PPF, I thought it was just another fixed deposit. When someone mentioned NPS, I confused it with EPF.
Big mistake.
These two schemes can literally make or break your retirement planning in India. Especially if you’re an NRI planning to return.
Here’s what happened to my friend Rajesh. He moved back from Singapore in 2019. Ignored both schemes for two years. Now he’s scrambling to catch up on his retirement corpus.
Don’t be like Rajesh.
The Data Battle: NPS vs PPF in Numbers 📈
Let me give you the raw data. No sugar coating.
| Aspect | NPS (National Pension System) | PPF (Public Provident Fund) |
|---|---|---|
| Current Returns | 9-12% annually (market-linked) | 7.1% annually (fixed, Q4 FY25) |
| Best Performer 2025 | ICICI Prudential: 28% (1-year equity) | Fixed at 7.1% (government declared) |
| Tax Benefits | Up to ₹2 lakh total deduction | ₹1.5 lakh under Section 80C |
| Lock-in Period | Until age 60 (can extend to 70) | 15 years (extendable in 5-year blocks) |
| Minimum Investment | ₹500/year (Tier-I), ₹250/year (Tier-II) | ₹500/year |
| Maximum Investment | No limit (subject to income %) | ₹1.5 lakh/year |
| Withdrawal Flexibility | 25% after 3 years (specific reasons) | 50% after 6th year |
| Risk Level | Market-linked (moderate to high) | Government-backed (virtually zero) |
| Maturity Taxation | 60% tax-free, 40% for annuity (taxable) | 100% tax-free (EEE status) |
| NRI Eligibility | Yes, NRIs can invest | No, NRIs cannot invest |
My Personal NPS vs PPF Journey 🛤️
When I returned to India, I had exactly ₹12 lakh in my savings account.
My mom (bless her soul) immediately suggested PPF. “Beta, it’s safe. Government guarantee.”
My startup friends pushed NPS. “Mani, you’re young. Take some risk. Markets will reward you.”
I was confused. So I did what any logical person would do.
I started both.
Year 1 (2018): Put ₹1.5 lakh in PPF, ₹1 lakh in NPS.
Year 2 (2019): PPF gave me exactly what was promised. NPS lost 5% due to market volatility.
My wife smirked. “Told you so.”
Year 3 (2020): COVID hit. PPF remained stable. NPS crashed initially, then bounced back stronger.
Year 4 (2021): NPS gave me 22% returns. PPF gave me 7.1%.
Year 5 (2022-2024): NPS averaged 12% annually. PPF stayed at 7-8%.
The Result: My NPS portfolio is now 40% larger than my PPF corpus.
But here’s the kicker. I’m not touching NPS money until 60. PPF money? I can access it partially after year 6.
Real Talk: Which One Should You Choose? 💭
Here’s what I learned after 7 years of investing in both.
Choose PPF if:
- You’re risk-averse (like my mom)
- You want guaranteed returns
- You need money in 15 years (not retirement)
- You’re close to retirement (less than 10 years)
- You want complete tax exemption
Choose NPS if:
- You’re under 45 years old
- You can stomach market volatility
- You want potentially higher returns
- You’re specifically planning for retirement
- You want higher tax benefits (₹2 lakh vs ₹1.5 lakh)
My Honest Recommendation: Do both.
I know, I know. Everyone wants a simple answer.
But here’s my strategy that’s worked well:
The 70-30 Formula:
- 70% of your retirement savings in NPS
- 30% in PPF
Why? NPS gives you growth. PPF gives you stability.
The NRI Angle: What You Must Know 🌍
Here’s something most financial advisors won’t tell you.
If you’re an NRI, you CANNOT invest in PPF.
Period. No exceptions.
But you CAN invest in NPS.
This was a game-changer for my cousin who lives in Dubai. He wanted to build an India corpus for his eventual return.
NPS was his only option among these two.
Pro tip for NRIs: Start NPS while you’re still in India. You can continue contributions even as an NRI.
The Tax Game: Where NPS Wins Big 🎯
Let me break down the tax benefits with real numbers.
PPF Tax Benefits:
- Contribution: ₹1.5 lakh deduction under 80C
- Growth: Tax-free
- Withdrawal: Tax-free
NPS Tax Benefits:
- Contribution: ₹1.5 lakh under 80C + ₹50,000 under 80CCD(1B)
- Growth: Tax-free
- Withdrawal: 60% tax-free, 40% goes to annuity (which is taxable)
Real Example: If you’re in 30% tax bracket:
- PPF saves you ₹45,000 in taxes annually
- NPS saves you ₹60,000 in taxes annually
That’s ₹15,000 extra saving every year with NPS.
Return Reality Check: 2025 Data 📊
Let me give you the latest performance data.
Top NPS Performers (5-Year Average):
- LIC Pension Fund: 9.01%
- UTI Pension Fund: 8.87%
- SBI Pension Fund: 8.62%
PPF Historical Returns:
- 2023-24: 8.0%
- 2024-25: 7.1%
- 5-year average: ~7.5%
My Portfolio Performance:
- NPS: 11.2% average (2018-2024)
- PPF: 7.6% average (2018-2024)
The ₹10 Lakh Test: If you invested ₹10 lakh in 2018:
- PPF today: ~₹14.2 lakh
- NPS today: ~₹19.8 lakh
That’s a difference of ₹5.6 lakh. In just 6 years.
The Liquidity Factor: When You Need Money 💰
Here’s where things get interesting.
PPF Liquidity:
- Partial withdrawal from 7th year
- Can withdraw 50% of balance
- Loan facility from 3rd to 6th year
- Interest rate on loan: 1% per annum
NPS Liquidity:
- Partial withdrawal from 3rd year
- Maximum 25% of contributions
- Only for specific purposes (house, medical, education)
- Limited to 3 withdrawals in entire tenure
Real Story: My friend Amit needed ₹5 lakh for his daughter’s MBA in 2023. His PPF helped him. NPS? Not so much.
Lesson: PPF is more liquid when you need emergency funds.
The Age Factor: When to Start What ⏰
If you’re 25-35: Go aggressive with NPS. You have 25-35 years for market volatility to even out.
If you’re 35-45: Mix of both. 60% NPS, 40% PPF.
If you’re 45-55: Safety first. 40% NPS, 60% PPF.
If you’re 55+: Unless you’re very risk-tolerant, stick to PPF.
My Personal Timeline:
- Age 30 (2018): 70% NPS, 30% PPF
- Age 37 (2025): 65% NPS, 35% PPF
- Age 45 (2033): Will shift to 50-50
- Age 55 (2043): Will move to 30% NPS, 70% PPF
The Compounding Magic: 20-Year Projection 🚀
Let me show you the power of compounding with real scenarios.
Scenario 1: ₹5,000 monthly for 20 years
| Investment | Total Invested | PPF (7.5% avg) | NPS (10% avg) |
|---|---|---|---|
| Amount | ₹12 lakh | ₹26.8 lakh | ₹36.4 lakh |
| Difference | – | – | ₹9.6 lakh extra |
Scenario 2: ₹10,000 monthly for 25 years
| Investment | Total Invested | PPF (7.5% avg) | NPS (10% avg) |
|---|---|---|---|
| Amount | ₹30 lakh | ₹79.2 lakh | ₹1.18 crore |
| Difference | – | – | ₹39 lakh extra |
The numbers speak for themselves.
My Family’s Strategy: The Hybrid Approach 👨👩👧👦
Here’s how my family approaches this:
My allocation (Age 37):
- NPS: ₹8,000/month
- PPF: ₹4,000/month
My wife’s allocation (Age 35):
- NPS: ₹6,000/month
- PPF: ₹6,000/month
Why this split?
- I’m more risk-tolerant
- She prefers security
- We get maximum tax benefits
- Diversified risk
For my sons:
- Started PPF accounts when they turned 18
- Will introduce them to NPS at 25
The Common Mistakes I See NRIs Make ❌
Mistake 1: Waiting too long to start My neighbor returned from Canada in 2020. Still hasn’t started either scheme. Lost 4 precious years.
Mistake 2: Putting all money in PPF Risk-averse approach costs you lakhs in opportunity cost.
Mistake 3: Ignoring NPS because it’s “complicated” It’s not. Takes 30 minutes to open online.
Mistake 4: Not maximizing tax benefits Many NRIs don’t claim the additional ₹50,000 NPS deduction.
Mistake 5: Emotional decisions Pulling out of NPS during market crashes. Biggest wealth destroyer.
The Final Verdict: My Recommendation 🎯
After 7 years of real experience, here’s my honest take:
For most people: Do both.
Start with this allocation:
Age 25-35: 70% NPS, 30% PPF
Age 35-45: 60% NPS, 40% PPF
Age 45-55: 40% NPS, 60% PPF
Age 55+: 20% NPS, 80% PPF
Exception cases:
Choose only PPF if:
- You’re extremely risk-averse
- You need money in 10-15 years
- You’re above 50 and close to retirement
Choose only NPS if:
- You’re under 30
- You have other stable income sources
- You won’t need this money before 60
How to Get Started Today 🚀
For PPF:
- Visit any major bank (SBI, HDFC, ICICI)
- Carry PAN, Aadhaar, bank statement
- Fill form, deposit minimum ₹500
- Get your PPF account number
For NPS:
- Visit npstrust.org.in
- Choose eNPS online registration
- Complete KYC with Aadhaar OTP
- Choose your fund manager
- Start with minimum ₹500
My bank recommendations:
- PPF: SBI (highest branch network)
- NPS: Online registration (easier than bank visits)
The Bottom Line 💡
Look, there’s no perfect answer.
Your age, risk appetite, and financial goals matter.
But if I had to choose just one? For most young professionals and NRIs, I’d pick NPS.
Higher returns. Better tax benefits. Built specifically for retirement.
However, the sweet spot is doing both.
PPF gives you peace of mind. NPS gives you wealth creation potential.
My wife was skeptical about NPS initially. Now she sees our portfolio growing faster than her friends who stuck to only PPF.
The magic formula: Start early. Stay consistent. Review annually.
Don’t overthink it. Start somewhere. Today.
Your 60-year-old self will thank you.
Want to connect? I share more NRI financial tips on BackToIndia.com. Hit me up if you have specific questions.
P.S.: My mom still prefers PPF. And you know what? That’s perfectly fine. She sleeps peacefully at night. Sometimes, peace of mind is worth more than extra returns.
Data Sources & References 📚
All data used in this article has been sourced from official government and financial institutions:
- PPF Interest Rates: Ministry of Finance, Government of India – Economic Times
- NPS Performance Data: Pension Fund Regulatory and Development Authority (PFRDA) – NPSTRUST.org.in
- Tax Benefits Information: Income Tax Department, Government of India – ClearTax NPS Guide
- Fund Performance Data: Value Research NPS Performance – ValueResearchOnline.com
- Comparative Analysis: HDFC Pension Management – HDFC Life NPS vs PPF
- NPS Returns Analysis: ClearTax Top Performing NPS Schemes – ClearTax NPS Schemes 2025
- Investment Guidelines: Bajaj Finance Investment Guide – Bajaj FinServ NPS vs PPF
- ICICI Bank Comparison: ICICI Bank NPS vs PPF Analysis – ICICI Bank Investment Comparison
All data is as of January 2025. Investment returns are subject to market risks. Past performance is not indicative of future returns. Please consult a financial advisor for personalized advice.