NPS vs EPF: Which Is Better For Your Retirement Corpus?
Last Updated:June 26, 2025, 14:07 IST
In conclusion, the decision to choose between EPF and NPS or both will solely lie on the person. It should be considered several pros and cons in mind.
EPF vs NPS: Which is better for retirement?
NPS Vs EPF: As more Indians begin to take retirement planning seriously, two investment instruments stand out—Employees’ Provident Fund (EPF) and the National Pension System (NPS). While both aim to provide financial security post-retirement, they differ significantly in structure, returns, and tax treatment.
EPF is a guaranteed return plan based on interest rates, whereas NPS is a market-linked investment programme that allows investors to choose investment plans and managers according to their aggressive, moderate and cautious return strategies.
In contrast, the NPS is a market-linked retirement scheme open to all Indian citizens aged 18–70. It offers more flexibility in terms of contribution amount and frequency. Investors can choose between equity and debt exposure, potentially earning returns in the range of 8% to 12%, depending on the asset mix.
EPF Vs NPS: Tax Treatment
EPF enjoys Exempt-Exempt-Exempt (EEE) tax status, meaning contributions, interest earned, and maturity amounts are tax-free.
NPS also offers additional tax benefits—beyond the Rs 1.5 lakh limit under Section 80C, subscribers can claim an extra Rs 50,000 deduction under Section 80CCD(1B).
Only NPS subscribers are eligible for an extra deduction under subsection 80CCD (1B) for investments up to Rs. 50,000 in NPS (Tier I accounts). The NPS contribution made by an employer for the benefit of their employees up to 10 per cent of their base pay plus DA is deducted from their taxable income up to Rs. 7.50 lakh. For Tier II account holders, there are no tax advantages.
EPF Vs NPS: Withdrawal Condition
While EPF allows for full withdrawal at retirement, NPS mandates that at least 40% of the corpus be used to purchase an annuity, which is taxable. The remaining 60% can be withdrawn tax-free.
Is it possible to transfer EPF to NPS?
Yes, EPF transfers to NPS are possible for those having Tier I NPs accounts. To do that, the transfer request form must be sent to the employer. The transfer from the PF/superannuation fund is mentioned by the employer in the uploading note.
A cheque or DD is then made out to the private employee in the name of the Point of Presence, Collection Account (NPS Trust) and Subscriber Name (PRAN). On the other hand, a recognised PF or superannuation fund will send a check or DD to government personnel made payable to ‘Nodal Office Name – Employer Name – Permanent Retirement Account Number (PRAN)’.
Which Is Better For Retirement Corpus?
In conclusion, the decision to choose between EPF and NPS or both will solely lie on the person. It should be considered several pros and cons in mind.
However, there is a probability that NPS will outperform EPF in the long run because it is market-linked. Some individuals may wish to move their EPF funds to market-linked returns NPS if they prefer them to fixed returns (EPF).
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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