Gene Perret describes retirement as “Retirement is wonderful. It is doing nothing without worrying about getting caught at it.” Retirement surely can be called the golden years of life because it is the phase of life when individuals can finally fulfill their dreams and live a stress-free life. Individuals have loads of aspirations and dreams that they postpone during their lifetime to finally fulfill after retirement. To successfully pursue those dreams, full-proof planning must be done by individuals beforehand. Retirement planning is extremely essential and salaried individuals are often advised to start retirement planning in their 20s itself. There are many retirement plans to assist individuals. To lead a financially stable and fulfilling life after retirement, individuals have two extensive retirement plans- the [National Pension System (NPS)](https://pensionbox.in/blog/What-is-NPS) and the [Provident Fund (PF)](https://pensionbox.in/blog/Withdrawal-of-Provident-Fund). But which is better among the two, and why? Let's address these questions briefly in this blog.

**To understand whether NPS is better or PF, we need to profoundly understand the meaning of the two, then only can we make an informed decision about our future.**

## What is NPS?

**The [National Pension System (NPS)](https://pensionbox.in/blog/What-is-NPS) is a voluntary, defined contribution towards savings for retirement that enables patrons to make the right decision for the future by generating savings throughout their lives.** NPS is a defined contribution towards retirement savings schemes through which subscribers can take a step forward towards increasing savings for life after retirement. NPS focuses on empowering citizens and inculcating in them the habit of saving for retirement. It is an attempt to find a long-term solution to the problem of providing adequate retirement income savings to every Indian citizen. 

**NPS- National Pension Scheme** is a great way to save for retirement. Anyone in the age group of 18-70 years, public or private employee, resident or non-resident can become a part of the National Pension Scheme program. [Section 80CCD(2) of the Income-tax Act](https://www.policybazaar.com/income-tax/section-80ccd/ covers the contribution of an employee towards the NPS. [Section 80C of the Income tax Act](https://cleartax.in/s/80C-Deductions) covers the tax deduction of ₹1.5 lakh for self-contribution to the National Pension Scheme. [Section 80CCD(1B) of the Income Tax Act](https://cleartax.in/s/section-80-ccd-1b) covers the additional deduction of ₹50,000 which is allowed if a contribution is made towards the NPS. Hence, if you are planning your finances to save up for the future and have a peaceful life after retirement, you must take this into note.

## What is PF?

**A [Provident Fund or Employee's Provident Fund (EPF)](https://play.google.com/store/apps/details?id=in.pensionbox.twa&hl=en&gl=US) is a savings and retirement fund for salaried individuals and their employers.** The salaried individuals of an organization contribute a small part of their basic pay every month. Similarly, the employer also contributes a similar amount on their behalf towards the PF scheme.

The Employees' Provident Fund (EPF) is a mandatory retirement savings scheme for salaried employees in India. It is mandated by the [Employees' Provident Fund Organization (EPFO)](https://www.epfindia.gov.in/), and both employers and employees contribute a portion of the employee's salary towards the EPF. So, if you are a salaried individual, a part of your salary will go to your EPF. EPFs are one of the greatest investments that could ensure your financial stability after you retire. Contribution to EPF, as well as the proceeds, are tax-free. So, if you use EPF the right way, you can end up with a sufficient corpus after retirement. Let's understand this through numbers.

Suppose Shalini starts contributing to EPF at the age of 30. Considering her basic salary + DA to be ₹15,000, and applying the current interest rate of 8.65%, Shalini's corpus at the age of 55 would be ₹24,65,259.

## Which is better- NPS or PF?

Salaried individuals prefer contributions to the National Pension Scheme over contributions to the Provident Fund. For those who cannot make up their minds, consider the following points given in the section below. 

## Why is NPS better than PF?

- **1. No fixed contributions-** The EPF mandates you to contribute a fixed amount of your salary in the name of the Provident Fund every month. However, in NPS, you just have to keep your account active by investing a minimum amount of ₹1000 every year. Unlike EPF, you can vary your contribution to NPS every month. You can even skip if you want.

- **2. Extra Tax Benefits-** Contributions to NPS up to ₹1.5 lakh are eligible for tax exemptions under [Section 80C of the Income Tax Act](https://cleartax.in/s/80C-Deductions. This provision also applies to EPF. However, with NPS you are eligible for an additional tax break. An additional investment of up to ₹50,000 beyond the ₹1.5 lakh investment annually is entitled to tax exemptions under [Section 80CCD(1B)](https://cleartax.in/s/section-80-ccd-1b). Thus NPS is better than PF because it helps save more taxes. 

- **3. No third-party involvement-** You can open an NPS account yourself electronically without any third-party involvement. 

-  4. NPS is available to salaried individuals as well as freelancers and self-employed individuals. **EPF does not offer that provision.**

- **5. Choice of investment-** You cannot decide where to allocate your money in EPF. In NPS, you have the liberty to decide where to invest between government bonds, corporate bonds, etc.

Pre-retirement planning is crucial in today's economy. The world is moving ahead at a crazy pace. In the blink of an eye, years pass by. Without a proper retirement plan in place, you may face hardships in the future. Therefore, [PensionBox](https://pensionbox.in/) wants you to understand the provisions of NPS and PF and then make an informed decision to make your retired life better!

Gene Perret describes retirement as “Retirement is wonderful. It is doing nothing without worrying about getting caught at it.” Retirement surely can be called the golden years of life because it is the phase of life when individuals can finally fulfill their dreams and live a stress-free life. Individuals have loads of aspirations and dreams that they postpone during their lifetime to finally fulfill after retirement. To successfully pursue those dreams, full-proof planning must be done by individuals beforehand. Retirement planning is extremely essential and salaried individuals are often advised to start retirement planning in their 20s itself. There are many retirement plans to assist individuals. To lead a financially stable and fulfilling life after retirement, individuals have two extensive retirement plans- the National Pension System (NPS) and the Provident Fund (PF). But which is better among the two, and why? Let's address these questions briefly in this blog.

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