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Individuals opting for the old regime can claim deductions for investments made in PPF, EPF and NPS under Section 80C.
Income Tax Return Filing 2026.
ITR Filing 2026: As the income tax return (ITR) filing season for the assessment year (AY) 2026-27 is going on, taxpayers are revisiting their investments for tax saving while building a retirement corpus. Among the most popular long-term retirement savings options are the National Pension System (NPS), Public Provident Fund (PPF) and Employees’ Provident Fund (EPF).
Although all three schemes are designed to help individuals save for retirement, they differ significantly in terms of tax deductions, taxation of returns and withdrawal rules. The choice also depends on whether you have opted for the old or the new income tax regime.
Here’s a detailed comparison of the tax treatment of NPS, PPF and EPF.
NPS: Offers Additional Tax Benefits Beyond Section 80C
The National Pension System is the only retirement product that offers tax benefits beyond the Rs 1.5 lakh limit under Section 80C.
Under the old tax regime, an individual’s contribution to NPS Tier-I qualifies for deduction under Section 80CCD(1), which forms part of the overall Rs 1.5 lakh limit under Section 80C and Section 80CCE. In addition, taxpayers can claim a separate deduction of up to Rs 50,000 under Section 80CCD(1B). This means an individual can claim a total deduction of up to Rs 2 lakh through NPS and other eligible investments.
A major advantage of NPS is the tax treatment of employer contributions. Under Section 80CCD(2), the employer’s contribution qualifies for a separate deduction and is not counted within the Rs 1.5 lakh Section 80C ceiling. Under the new tax regime, employer contributions of up to 14% of salary (basic salary plus dearness allowance) are eligible for deduction, making NPS one of the few tax-saving avenues still available under the default tax regime.
At retirement, up to 60% of the accumulated corpus can be withdrawn tax-free, while the remaining amount is generally used to purchase an annuity. The pension received from the annuity is taxed according to the individual’s applicable income tax slab.
PPF: Complete EEE Tax Status
The Public Provident Fund (PPF) continues to enjoy the coveted Exempt-Exempt-Exempt (EEE) status. Under the old tax regime, investments made in PPF qualify for deduction under Section 80C, subject to the overall limit of Rs 1.5 lakh. Interest earned on the account is completely tax-free, and the maturity proceeds are also exempt from income tax, making it one of the most tax-efficient investment products available.
However, taxpayers opting for the new tax regime cannot claim any deduction for fresh investments made in PPF, although the interest and maturity amount continue to remain tax-free under the scheme’s provisions.
EPF: Tax Benefits Mainly For Salaried Employees
The Employees’ Provident Fund (EPF) is a mandatory retirement savings scheme for most organised sector employees. Employee contributions qualify for deduction under Section 80C under the old tax regime, subject to the overall ceiling of Rs 1.5 lakh. Employer contributions are governed under separate provisions.
Interest earned on EPF deposits remains tax-free subject to the conditions laid down under the Income-tax Act. Withdrawals are generally exempt from tax if the employee has completed the prescribed period of continuous service and satisfies the applicable conditions. Premature withdrawals, however, may attract tax depending on the circumstances.
Old Tax Regime Vs New Tax Regime
The old tax regime continues to favour taxpayers who actively invest in tax-saving instruments. Individuals opting for the old regime can claim deductions for investments made in PPF, EPF and NPS under Section 80C. NPS provides an additional advantage through the extra Rs 50,000 deduction under Section 80CCD(1B), making it one of the most effective retirement products for reducing taxable income.
Under the new tax regime, deductions under Section 80C are not available. Consequently, investments in PPF and employee contributions to EPF do not provide any tax deduction. NPS, however, retains an important tax advantage because the employer’s contribution remains eligible for deduction under Section 80CCD(2).
Individuals opting for the old tax regime can claim deductions for investments in PPF, EPF, and NPS under Section 80C. The National Pension System (NPS) offers tax benefits beyond the Rs 1.5 lakh limit under Section 80C, specifically under Section 80CCD(1).
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