As Indian savers look ahead at the next financial year, the debate surrounding the most rewarding retirement scheme keeps getting heated. The three most trusted long-term options remain EPF, PPF, and NPS. All three are backed by the government, though returns, tax benefits, risks, and lock-in rules differ widely. Knowing the difference is important prior to choosing the right retirement strategy for 2025.
Outlook Returns: Which Scheme Performs Best in 2025?
On returns, EPF and PPF assure a fixed rate of interest that is stable, while NPS is market-linked and may therefore score over a longer period of time. EPF currently offers 8.25 percent as return for FY 2024–25, which is among the highest fixed return instruments available to the salaried class. Correspondingly, PPF is at an interest rate of 7.1 percent for Q2 of FY 2025–26, unchanging yet considerably lower than EPF.
But NPS stands out with its potential to deliver between 10 and 14 percent annually, depending on fund choices and market performance. Long-term returns from NPS tend to be higher compared to traditional fixed-income products because NPS invests in equity, corporate bonds, and government securities. However, unlike EPF and PPF, returns are not assured.
Overall, NPS gives the best potential returns in 2025, EPF is safe and stable, and PPF is the lowest-yielding but safest in the long term.
Lock-In and Withdrawal Rules
The withdrawal facility also varies sharply across the three retirement schemes: EPF is generally locked till retirement, with partial withdrawals allowed for specific purposes like medical treatment, house construction or children’s education. Even employees who are unemployed for two months are allowed to withdraw the accumulated balance.
PPF is more restrictive, carrying a lock-in period of 15 years compulsorily. Partial withdrawals are allowed after five years, thus limiting liquidity for the investor who may need it earlier.
NPS has the strictest lock-in rules. Funds remain locked until the investor turns 60, although partial withdrawals after three years are allowed under certain conditions. At maturity, only 60% of the corpus can be withdrawn as a lump sum; the remaining 40% has to be utilized to purchase an annuity.
In terms of liquidity, EPF provides maximum flexibility, NPS offers conditional access, and PPF is meant only for those who can stay invested for the long term.
Risk and Safety: Market-Linked versus Guaranteed Returns
The risk factors differ enormously in these schemes. EPF and PPF are government-backed instruments with assured returns for investors with conservative mindsets. Their principal as well as interest payouts are fully protected. PPF, in particular, is considered one of the safest long-duration products available in India.
NPS, however, has market risk, owing its returns to the movement of equity and debt markets. This exposes investors to some volatility; the long investment horizon smoothes out market fluctuations and provides potentially higher returns than the EPF and PPF.
EPF and PPF are good for risk-averse savers, while those aiming at higher and market-driven growth may go for NPS.
Tax Benefits in 2025
Tax treatment is a key deciding factor in selecting the best retirement plan. EPF and PPF still enjoy EEE status, which implies that contributions are deductible, interest is exempt, and maturity amounts are also tax-free. So both of these are two most tax-efficient long-term options to save.
NPS, in fact, extends even stronger tax incentives, especially for those aiming to reduce their taxable income. Investors can claim deductions of up to ₹1.5 lakh under Section 80C, an additional ₹50,000 under Section 80CCD(1B), and further deductions on employer contributions under Section 80CCD(2). However, unlike EPF and PPF, the annuity income received at retirement from NPS is considered to be taxable.
Hence, while EPF and PPF offer fully tax-free maturity, NPS offers the most tax deductions during the investment period.
Which Scheme Should You Choose in 2025?
For salaried employees, EPF remains the most stable and predictable retirement tool offering an unbeatable mix of assured returns and tax-free maturity. For investors seeking a safe long-term instrument with no market exposure, backed by the government, PPF fits the bill. NPS would be ideal for those looking at high growth, maximum tax benefits, and disciplined retirement structure.
By 2025, the NPS emerges as the highest-return option, EPF stands out for its reliability and favourable tax treatment, while the PPF continues to draw in the more risk-averse saver.
According to financial planners, a balanced mix of all three schemes can offer the ideal blend of safety, growth, and tax efficiency to help Indians build a stronger retirement corpus.
Sofia Babu Chacko is a journalist with over five years of experience covering Indian politics, crime, human rights, gender issues, and stories about marginalized communities. She believes that every voice matters, and journalism has a vital role to play in amplifying those voices. Sofia is committed to creating impact and shedding light on stories that truly matter. Beyond her work in the newsroom, she is also a music enthusiast who enjoys singing.
