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Preparing a large and secure fund for retirement has become the first need of every working person. EPF, PPF and NPS are the three major schemes in India, which offer different returns, risks and tax benefits. To choose the right plan, it is important to understand which option is most beneficial according to age and risk appetite.
New Delhi. EPF i.e. Employees Provident Fund is considered to be the most stable option in retirement planning, because it provides interest assured by the government. For the current financial year 2024–25, interest on EPF has been fixed at 8.25 percent, which is automatically deducted from the salary and deposited. In this, the contribution of both the employee and the employer together creates a big fund. EPF forms a strong base for low-risk investors and employed individuals, as it is a regular, disciplined and completely safe way of saving. The tax-free withdrawal after five years of continuous service makes it even more attractive.
PPF: Completely tax-protected government scheme
PPF i.e. Public Provident Fund is the choice of those who want secure and tax-free income without risk. It comes with an interest rate of 7.1%, and has EEE status – meaning there is no tax on the deposit amount, interest and maturity amount. The lock-in period of 15 years is certainly long, but the option of partial withdrawal and loan in between makes it flexible. The opportunity to invest just Rs 500 to Rs 1.5 lakh annually makes it extremely popular for the middle income group. PPF is an essential part of the retirement portfolio for investors seeking stability.
NPS gets the highest long-term returns
NPS i.e. National Pension System is a market-linked scheme, which has a mix of equity, corporate bonds and government securities. NPS has given average returns of 9–11% in the long run, which is much higher than EPF and PPF. In this, the investor can choose his own fund manager and asset allocation, which gives young investors an opportunity for rapid growth in the long term. Moreover, the additional tax benefit of Rs 50,000 in section 80CCD(1B) makes it more attractive. On retirement, 60% of the amount is available tax-free and 40% is used as monthly pension, which ensures stable income.
Which option is best?
According to experts, no single plan is perfect for everyone. Young investors (below 35 years) are advised to invest more in NPS, as equity gives strong returns in the long run. At the age of 35 to 45 years, a mixture of EPF, PPF and NPS is suitable. Whereas for investors aged 45+, safer options like EPF and PPF are beneficial, so that the risk is less near retirement. By investing by balancing all three schemes, a large, stable and inflation-proof retirement fund can be created, which forms a strong basis for future financial security.
