NPS vs PPF: Which is a Better Investment Option?

NPS and PPF are popular investment options offering tax benefits, long-term savings, secure returns, and retirement planning opportunities.
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NPS vs PPF
OPEN FD
4 mins
31-December-2025

When it comes to building wealth for the future, two schemes often stand out—National Pension Scheme (NPS) and Public Provident Fund (PPF). Both are backed by the government, but they serve different needs. NPS is retirement-focused and market-driven, while PPF is safer, offering fixed returns with a 15-year lock-in. To make the right choice, you need to understand how each works—and where an FD can also fit into your financial plan.

What is NPS?

The National Pension Scheme (NPS) is a retirement savings initiative regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It allows individuals from the public, private, and unorganised sectors (except armed forces) to build a pension fund during their working years.

Key features of NPS:

  • Market-linked investment for long-term growth

  • Tier-I (mandatory) and Tier-II (voluntary) accounts

  • Partial withdrawals allowed after 3 years for specific needs

  • Tax benefits under Section 80C and Section 80CCD (1B)

If you’re looking for safer diversification, consider Bajaj Finance FD alongside your NPS. It offers up to 7.30% p.a. guaranteed returns, unlike NPS, where returns depend on market performance. Open FD.

Who can invest in NPS?

Any Indian citizen between 18 and 70 years can open an NPS account, provided they meet KYC requirements and are not declared insolvent or of unsound mind.

Features and benefits of NPS

Below are the key features and benefits of the National Pension System:

Professional fund management
NPS investments are managed by experienced pension fund managers who use their expertise to balance risk and returns, helping your retirement savings grow in a disciplined manner.

Tax benefits
NPS offers attractive tax advantages. Contributions to a Tier I account are eligible for deductions under Section 80C and an additional deduction under Section 80CCD(1B), subject to prescribed limits, making it a tax-efficient retirement savings option.

Flexible withdrawal options
Designed for long-term retirement security, NPS allows you to withdraw up to 60% of the corpus as a tax-free lump sum at the age of 60. The remaining 40% is used to purchase an annuity, ensuring a steady pension income after retirement.

Easy access and convenience
NPS is available to Indian citizens between 18 and 70 years of age. It offers a simple, digital-friendly platform to manage contributions, track investments, and handle withdrawals with ease.

Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

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What is PPF?

The Public Provident Fund (PPF) was introduced in 1968 as a government-backed savings and tax-saving tool. It is popular among risk-averse investors looking for stable, long-term returns.

Key features of PPF:

  • Minimum investment: Rs. 500 per year

  • Maximum investment: Rs. 1.5 lakh per year

  • Tenure: 15 years (extendable in blocks of 5 years)

  • Current interest rate: 7.1% p.a. (compounded annually)

Unlike PPF’s long lock-in, a Bajaj Finance FD gives you flexible tenures ranging from 12 to 60 months, making it easier to align with short- and medium-term goals. Check rates.

Who can invest in PPF?

Any Indian citizen can open a PPF account. One person can hold only one account, except when opening an additional account for a minor. NRIs and Hindu Undivided Families (HUFs) are not eligible.

Also Read: How to Change/Reset UAN password

NPS and PPF: Key differences

Parameter

NPS (National Pension System)

PPF (Public Provident Fund)

Safety

Market-linked returns; regulated by PFRDA, so returns may fluctuate

Government-backed scheme with fixed, guaranteed returns

Liquidity

Partial withdrawals allowed after 3 years for specified purposes

Partial withdrawals allowed from the 7th year; loan facility available from the 3rd to 6th year

Taxation

Contributions eligible under Section 80C and additional deduction under Section 80CCD(1B). At maturity, 40% can be withdrawn tax-free, while 40% is used to buy an annuity (taxable income)

Contributions qualify under Section 80C. Interest earned and maturity amount are fully tax-free (EEE category)

Bajaj Finance FD doesn’t have a tax-saving variant, but it offers assured post-tax earnings with higher flexibility, making it a practical add-on to your tax-efficient instruments. Open an FD with just Rs. 15,000.

Fixed deposit variants

Highest Credit Ratings | Trusted with over 1.4 million Deposits | Assured Returns on FD
Recommended

Fixed Deposit - 60 Months

INTEREST RATES UP TO
7.30% p.a.
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Fixed Deposit - Senior Citizen

INTEREST RATES UP TO
7.30% p.a.
Invest Online

Fixed Deposit - Age below 60

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Minor

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - HUF

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Sole Proprietor

INTEREST RATES UP TO
6.95% p.a.
Open FD

NPS vs PPF vs Bajaj Finance FD

Parameter

NPS

PPF

Bajaj Finance FD

Maturity

At 60 years

15 years (extendable)

12–60 months

Interest

9–12% (market-linked)

7.1% p.a. (fixed)

Up to 7.30% p.a. (guaranteed)

Minimum Investment

Rs. 1,000

Rs. 500

Rs. 15,000

Maximum Investment

No upper limit

Rs. 1.5 lakh per year

Up to Rs. 3 crore


Also Read : Key Differences Between NPS and UPS

Conclusion

Both NPS and PPF are excellent for long-term wealth creation, but they serve different purposes—NPS is retirement-focused and market-driven, while PPF is safer with fixed returns. However, if you want a balance of safety, flexibility, and assured earnings, adding a Bajaj Finance FD to your portfolio can be the smart move. It gives you shorter lock-ins, guaranteed growth, and higher liquidity—helping you achieve both short- and long-term financial goals. Open FD.

 

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Frequently asked questions

Can I take both NPS and PPF?

Investing in both the National Pension Scheme (NPS) and the Public Provident Fund (PPF) can help you claim a maximum deduction of Rs 1.5 lakh under Section 80C of the Income Tax Act. Additionally, NPS offers extra tax benefits beyond Section 80C.

Which is better for retirement planning, NPS or PPF?

NPS may be better for those seeking higher returns and willing to take moderate risks, as it invests in equities and debt. PPF is ideal for risk-averse individuals preferring a fixed return. The choice depends on your risk tolerance and financial goals.

Is a Bajaj Finance FD safer than NPS and PPF?

Yes, Bajaj Finance FDs are rated AAA by CRISIL and ICRA, ensuring the highest level of safety for your money. While NPS and PPF are government-backed, FD offers guaranteed returns without market risks. Check rates offered by Bajaj Finance on FDs and invest now!

Can I invest Rs. 1.5 lakh in PPF and Rs. 50,000 in NPS?

Yes, you can invest Rs. 1.5 lakh in PPF and an additional Rs. 50,000 in NPS. PPF investments qualify for tax deduction under Section 80C, while the extra Rs. 50,000 invested in NPS is eligible for deduction under Section 80CCD(1B), allowing higher overall tax savings.

Is NPS better than PPF?

NPS is not necessarily better than PPF—it serves a different purpose. NPS is market-linked and suited for long-term retirement planning with potentially higher returns, while PPF offers guaranteed, risk-free returns backed by the government. The better option depends on your risk appetite and retirement goals.

Which is more beneficial, PPF or NPS?

PPF is more beneficial for conservative investors seeking safety and tax-free returns. NPS is beneficial for those focused on retirement income and willing to accept market-linked risk for potentially higher growth. Many investors use both together to balance safety, returns, and tax efficiency.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.