NPS vs EPF: Both Build Wealth, Differently
EPF and NPS both build retirement corpus but work differently. EPF: mandatory for most salaried, fixed ~8% return, low risk, liquidity on job change. NPS: voluntary, market-linked 9–12% (historical), moderate risk, locked till 60. For long-term wealth, EPF gives stability; NPS adds growth. Many salaried employees use both. This guide compares NPS vs EPF for wealth creation: returns, risk, tax, liquidity, and when to add NPS on top of EPF.
Key Takeaways
- EPF: Mandatory, 12%+12%, ~8% fixed. Lump sum at withdrawal. Low risk
- NPS: Voluntary, market-linked. 80C + ₹50K 80CCD(1B). Locked till 60. Higher potential return
- Returns: EPF ~8%. NPS 9–12% historical (varies). NPS can outperform over 20+ years
- Both: EPF for safety, NPS for extra tax saving and growth. Use both if you can
- Liquidity: EPF: withdraw on job change (tax-free after 5 yr). NPS: locked till 60
EPF: How It Builds Wealth
- Contribution: 12% of (Basic + DA) from you, 12% from employer. Employer splits: 3.67% EPF, 8.33% EPS.
- Return: 8–8.5% (declared annually). Guaranteed. No market risk.
- Corpus: Compound growth over 25–30 years. ₹50K/month contribution can grow to ₹1.5–2 crore by 60.
- Liquidity: Full withdrawal on retirement, resignation (5+ years), or unemployment. Partial for house/medical/education.
NPS: How It Builds Wealth
- Contribution: Voluntary. Min ₹500/year. You choose equity/debt mix. Employer can add up to 10% basic.
- Return: Market-linked. Historical 9–12% for equity-heavy. Varies by fund and period.
- Corpus: Higher potential than EPF over long term, but with volatility. ₹5,000/month for 25 years at 10% ≈ ₹65 lakh.
- Liquidity: Tier I locked till 60. Partial withdrawal for house, education, medical (conditions). At 60: 60% lump sum, 40% annuity.
Returns Comparison
📊 25-year horizon, ₹5,000/month (each)
When EPF Alone May Not Be Enough
EPF corpus depends on basic salary. If basic is low (e.g. ₹25,000), EPF contribution is small—you may get ₹50–80 lakh by 60, which may not be enough for 25+ years of retirement. Adding NPS and SIP in equity can bridge the gap. Use Retirement Planner to project EPF + NPS + SIP and see if you're on track.
When to Add NPS
- Extra tax saving: 80CCD(1B) ₹50K saves up to ₹15K tax. Lowers net cost of investment.
- Want higher growth: Willing to take market risk for 10+ years. Equity allocation in NPS.
- Employer offers NPS: Free employer contribution. Don't miss it.
- EPF won't be enough: Run Retirement Planner. If shortfall, add NPS and SIP.
Use Our Calculators
EPF Calculator: Project balance with salary growth. NPS Calculator: Project NPS corpus. Retirement Planner: Combine both for total corpus.
Disclaimer
NPS returns are market-linked and not guaranteed. EPF rates are declared annually. Past performance doesn't guarantee future results.