All three are tax-efficient long-term instruments, but they serve different needs. NPS is a retirement-only product with limited liquidity until 60. PPF is a 15-year sovereign-backed deposit with EEE status. ELSS is equity mutual funds with the shortest lock-in.
| Attribute | NPS | PPF / ELSS |
|---|---|---|
| Lock-in | Till 60 (NPS) | 15 yrs (PPF) / 3 yrs (ELSS) |
| Tax deduction | ₹1.5L (80C) + ₹50k (80CCD-1B) | ₹1.5L 80C only |
| Returns (historical, 10y) | 9-11% (75% equity option) | 7.1% PPF / 12-14% ELSS |
| Returns nature | Market-linked | Sovereign fixed / Market |
| Maturity tax | 60% lump-sum tax-free, 40% annuity taxable | Fully tax-free (PPF) / 10% LTCG > ₹1.25L (ELSS) |
| Partial withdrawal | After 3 yrs, max 25%, only for specified reasons | Year 7+ for PPF / Anytime after lock-in for ELSS |
| Risk | Low to moderate (auto choice) | Zero (PPF) / High (ELSS) |
| NRI eligibility | Yes (Tier I) | No new PPF / Yes ELSS |
Our recommendation
Use NPS to capture the extra ₹50,000 deduction under 80CCD(1B) — pure tax arbitrage that no other instrument offers. Use ELSS for the bulk of your 80C if you have a 7+ year horizon and can stomach equity volatility. PPF deserves a place only if you want a guaranteed-return debt sleeve or have minor children (Sukanya/PPF combo).
FAQs
Is NPS forced annuity a deal-breaker?
It used to be. Today's annuity rates of 6-7% are below FD rates, but the 40% mandatory annuity at age 60 still locks in part of your corpus at sub-optimal returns. Treat NPS as a tax saver, not a complete retirement plan.
Can I do all three?
Yes, and many investors do. Typical split: ₹1.5L in ELSS (80C) + ₹50k in NPS (80CCD-1B) + ₹50-100k discretionary in PPF for safety.
Last updated: 08 Apr 2026