PPF vs ELSS vs NPS: Tax Rules Compared

PPF, ELSS and NPS are three common ways to invest for tax saving in India. They differ in lock-in, exit rules and how the deduction works. This page compares what we could confirm from official sources for FY 2026-27. It does not forecast returns or say which one is best, because that depends on your goals, your regime and your risk tolerance.

Regime First

Deductions for PPF and ELSS come through section 123 (formerly 80C), which allows up to ₹1,50,000. Own NPS contributions have a separate deduction of up to ₹50,000 under section 124(3) (formerly 80CCD(1B)). Section 202(2) switches these off in the default new regime, apart from employer NPS contributions under section 124(1) and 124(2). So if you are in the new regime, a PPF, ELSS or own-NPS investment does not reduce your tax. See our guide on how to save income tax.

PPF (Public Provident Fund)

• Lock-in: 15 years, extendable in 5-year blocks, with limited partial withdrawal from the 7th year (Public Provident Fund Scheme, 2019).
• Deposit: ₹500 minimum and ₹1,50,000 maximum per financial year.
• Rate: set by the government each quarter. India Post lists 7.1% per annum at the time of writing; check the current quarter before you invest.
• Tax: the Income Tax Department exempt-income page describes PPF deposits as tax-exempt under the EEE system, with contributions deductible under 80C (now section 123 in the new Act). That page uses 1961-Act section numbers.

Details are in our PPF account rules guide.

ELSS (Equity Linked Savings Scheme)

• Lock-in: three years from the date of allotment of units (Equity Linked Savings Scheme, 2005, Notification 226/2005).
• What it holds: the SEBI investor site says at least 80% of an ELSS corpus is in equity and equity-related instruments.
• Returns: market-linked and not guaranteed, per SEBI.
• Tax: Schedule XV of the Income-tax Act, 2025 lists units of notified mutual-fund schemes among the items eligible under section 123, up to ₹1,50,000 in total with the other items.

NPS (National Pension System)

• Exit for non-government subscribers (All Citizen model): normal exit at 60 years or after 15 years of subscription, whichever is earlier (NPS Trust).
• Annuity rule on normal exit: if the accumulated pension wealth is ₹8 lakh or less, it can all be taken as a lump sum. Between ₹8 lakh and ₹12 lakh, up to ₹6 lakh can be taken as a lump sum and the balance goes to an annuity or periodic payouts for at least 6 years. Above ₹12 lakh, at least 20% must buy an annuity for non-government subscribers and at least 40% for government subscribers (NPS Trust).
• Tax: employer contribution is deductible under section 124(1) and 124(2) (up to 14% of salary for a new-regime taxpayer). Your own contribution is deductible up to ₹50,000 under section 124(3), only in the old regime. Section 124(5) bars claiming the same amount under section 123 as well. Tax on withdrawals and annuity income is not covered on this page.

PFRDA amended the exit regulations in December 2025, so check the current rules before you plan an exit. Our annuity calculator page covers the annuity side.

Side-by-Side

	PPF	ELSS	NPS
Lock-in or exit	15 years	3 years	Normal exit at 60 or after 15 years (All Citizen)
Return basis	Government-set rate, reviewed quarterly	Market-linked, not guaranteed	See NPS Trust for scheme details
Deduction route (old regime)	Section 123, up to ₹1,50,000 combined	Section 123, up to ₹1,50,000 combined	Section 124(3), up to ₹50,000, separate from section 123
New regime	No deduction	No deduction	Employer contribution only

How to Choose

• Decide your regime first. If it is the new regime, none of the three gives you a deduction on your own money.
• Match the lock-in to when you will need the money.
• Check the current PPF rate and the current NPS exit rules at the sources below before you invest.
• Rules can be amended. Confirm with incometaxindia.gov.in or a tax professional.

Sources: section 123, 124 and 202 are from the Income-tax Act, 2025 as amended by the Finance Act, 2026 (text read on indiacode.ecourtsindia.com, a non-government mirror). PPF: Income Tax Department exempt income page and the India Post savings schemes page. ELSS: Notification 226/2005 and the SEBI investor page on ELSS. NPS: NPS Trust normal exit page and the PFRDA exit regulations.