PPF, EPF, NPS and Post Office Schemes — The Complete Guide
The government-backed schemes that anchor most Indian retirement portfolios — how they work, when to use them, and the maths that decides it.
Small savings schemes are government-guaranteed instruments with sovereign backing. Returns are modest — usually 7–8% — but the guarantee is real, and several offer unique tax benefits nothing else in India matches. Getting the mix right is one of the highest-leverage decisions in a personal finance plan. This guide walks through each scheme with the practical rules that actually matter.
The full menu, at a glance
| Scheme | Rate (Q2 FY26) | Lock-in | Max/year | Tax treatment |
|---|---|---|---|---|
| PPF | 7.1% | 15 years | ₹1.5L | EEE (fully tax-free) |
| EPF (salaried) | 8.25% | Retirement / job change | 12% of basic | EEE up to ₹2.5L/yr contribution |
| NPS Tier-1 | 9–11% (market-linked) | Age 60 | No cap | 80C ₹1.5L + 80CCD(1B) ₹50k; 60% withdrawal tax-free |
| Sukanya Samriddhi (SSY) | 8.2% | 21 years / marriage | ₹1.5L | EEE |
| Senior Citizen Savings (SCSS) | 8.2% | 5 years | ₹30L | 80C; interest taxable |
| POMIS | 7.4% | 5 years | ₹9L single / ₹15L joint | Interest taxable |
| NSC | 7.7% | 5 years | No cap | 80C on investment; interest taxable but reinvested |
| KVP | 7.5% | 115 months (money doubles) | No cap | Interest taxable |
Rates are reset every quarter by the Ministry of Finance. Once you invest in a scheme, most (except NPS and RBI Floating Rate Bonds) lock your rate for the full tenure at the rate that was live when you invested.
PPF — the workhorse tax-free instrument
The Public Provident Fund is India's most popular long-term instrument, and for good reason. 15-year lock-in, 7.1% guaranteed tax-free, contributions eligible under 80C. It's the one product where 'lock-in' actually helps — you're forced to leave the money alone to compound.
- •Open online at any major bank (SBI, HDFC, ICICI) or Post Office. Requires only PAN, Aadhaar, and a savings account.
- •Invest between ₹500 (minimum) and ₹1.5L per year. Deposit before 5th of any month to earn full-month interest.
- •Loans allowed from Year 3–6. Partial withdrawal allowed from Year 7. Full close after 15 years, or extend in 5-year blocks.
- •One account per person, plus one for each minor child. NRIs cannot open new PPF accounts, but can continue existing ones till maturity.
The 5th-of-the-month rule
PPF interest is calculated on the lowest balance between the 5th and end of the month. If you deposit ₹1.5L on 4 April vs 6 April, the second deposit loses one full month of interest. Do your annual PPF deposit at the very start of April.
PPF over 15 years at 7.1% turns ₹1.5L/year into ₹40.7L, all of it tax-free. Extended for another 15 years (total 30), the same annual contribution compounds to over ₹1.5 Cr — again, tax-free.
EPF — automatic, but not optional-optimal
If you're salaried at a company with 20+ employees, 12% of your basic salary goes to EPF automatically, matched by your employer. Interest for FY 2024-25 was 8.25% — the highest guaranteed rate available anywhere in India.
- •Employer contribution splits: 8.33% to EPS (pension), 3.67% to EPF corpus. Cap on EPS-eligible salary is ₹15,000 basic.
- •Tax status: EEE, but interest on your own contribution above ₹2.5 lakh/year (₹5 lakh if employer contributes nothing) is now taxable.
- •VPF (Voluntary Provident Fund) lets you contribute more than 12% at the same 8.25% rate. Excellent for high-earning salaried who want more risk-free debt exposure — subject to the ₹2.5L tax-free interest cap.
- •Track balance on the EPFO portal or Umang app. Always transfer old EPF to new employer within 3 months of switching jobs — untransferred balances lose interest after 3 years of no contribution.
NPS — India's only real pension product
The National Pension System is market-linked (you choose equity/corporate bond/government bond allocation), managed by professional fund managers, and comes with an extra ₹50,000 deduction under 80CCD(1B) that no other scheme offers. Long-term returns of 9–11% p.a. depending on equity allocation.
- •Tier-1 (retirement): Locked till age 60. Aggressive equity allocation available till age 50, then auto-glide-path to safer assets. 60% withdrawable tax-free at 60; remaining 40% must buy an annuity.
- •Tier-2 (flexi): Optional, no lock-in, no tax benefit. Rarely worth using — a mutual fund does the same job with more flexibility.
- •Choose 'Active' fund choice to control allocation, 'Auto' if you want the lifecycle glide-path.
- •Fund manager fees are microscopic (0.03–0.09%), making NPS the cheapest managed portfolio in India.
The 40% annuity catch
At age 60, 40% of your NPS corpus must go into an annuity that pays 5–7% for life. Annuity returns are historically poor, and the payouts are fully taxable. NPS is still a good product for the tax deduction, but don't treat it as your only retirement plan — supplement with equity mutual funds you can freely withdraw.
Sukanya Samriddhi, SCSS, POMIS — niche but powerful
- •Sukanya Samriddhi (SSY): For girl children under 10. 8.2% tax-free, 21-year tenure. The highest-yielding EEE instrument for its risk level. Open one for each daughter.
- •SCSS: For citizens 60+. 8.2%, quarterly interest payout, ₹30L cap. Preferred over FDs for retiree income.
- •POMIS: Monthly income from your lump sum. 7.4%, 5-year lock-in, ₹9L single / ₹15L joint. Interest paid monthly to your savings account — useful for retirees needing predictable cash flow.
- •RBI Floating Rate Bonds: 8.05% (linked to NSC + 0.35%), 7-year lock-in, quarterly payout, no upper limit. One of the best sovereign options for large debt allocations.
How to combine these into a coherent plan
- 1Salaried: EPF happens automatically. Add PPF ₹1.5L/year (fills 80C along with EPF). Add NPS ₹50k/year for the 80CCD(1B). That covers your debt/retirement floor.
- 2Self-employed: PPF ₹1.5L + NPS ₹50k + SSY (if daughters) forms the core. Add debt mutual funds or RBI FRB for anything more.
- 3Retired: SCSS up to ₹30L → POMIS up to ₹9L → then FDs and debt funds for the balance. Layer monthly incomes so cash flows through the year.
- 4For a girl child: Open SSY early, contribute ₹1.5L/year for 15 years. At age 21, corpus is roughly ₹68 lakh, fully tax-free — pays for higher education without touching the parents' retirement.
New tax regime consideration
On the new regime, 80C and 80CCD(1B) deductions don't apply. PPF, EPF, SSY are still valuable for the tax-free returns and safety, but the case for NPS weakens (you lose the ₹50k extra deduction). Reallocate accordingly.
Common mistakes to avoid
Contributing to PPF at the end of March
You lose a full year of compounding by depositing on 31 March vs 1 April the previous year. Set a calendar reminder for early April.
Withdrawing EPF when switching jobs
Common temptation, especially for the first job change. You lose the tax-free compounding, pay tax if withdrawn within 5 years, and blow up your retirement corpus. Always transfer, never withdraw.
Buying annuities before 60
Some agents push 'immediate annuity' plans to salaried people in their 40s. Annuity returns are 5–7% and locked for life. Terrible product for wealth accumulation.
Opening SSY late
SSY earns 8.2% tax-free for 21 years. Opened at daughter's age 8 vs age 1 = ₹15+ lakh less corpus. Open the day the account is legally allowed.
Confusing PPF/EPF safety with equity returns
PPF at 7.1% doesn't beat equity over 15 years. Use PPF for the debt sleeve of your portfolio, not as your only investment. A young saver going 100% into PPF is under-invested for long-term goals.
Your action checklist
- PPF account open, ₹1.5L deposited by 5 April every year
- EPF UAN activated, KYC complete, nominee added
- Old EPF balances transferred to current employer's account
- NPS Tier-1 account open (if using old regime), ₹50k contributed for 80CCD(1B)
- SSY opened for each daughter under 10
- Retirement plan doesn't rely on the annuity portion of NPS alone
- Debt allocation split across at least 2 schemes to avoid rate-reset risk