Earn ₹2 Lakh+ Tax-Free: Smart Combo of PPF & NPS Explained, 8 Points

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Maximize Your Tax-Free Retirement Income: Combine PPF & NPS Smartly for ₹2 Lakh+ Annual Tax Savings

1️⃣ Why PPF and NPS Matter for Tax-Free Income

• Retirement + Tax Efficiency: Both PPF and NPS help build long-term retirement wealth while reducing annual tax burden.

• Dual Strategy: Combining both can secure tax-free returns (PPF) and market-linked growth (NPS) — ideal for balancing safety and returns.

2️⃣ Public Provident Fund (PPF): Safe & Fully Tax-Free

• Investment Limit: Up to ₹1.5 lakh/year under Section 80C (Old Regime).

• Tax Benefit Type: EEE (Exempt-Exempt-Exempt) —

  • Investment: Tax-deductible under 80C.

  • Interest: Tax-free.

  • Maturity: Tax-free.

• Interest Rate: Around 7.1% per annum (subject to quarterly revision by Govt).

• Tenure: 15 years (extendable in 5-year blocks).

• Liquidity: Partial withdrawals after 6 years allowed.

• New Regime Note: No deduction under Section 80C, but interest and maturity remain tax-free.

📊 PPF Snapshot

3️⃣ National Pension System (NPS): Growth with Tax Advantage

• Market-Linked Returns: Mix of equity + debt exposure for long-term growth.

• Best For: Salaried and self-employed seeking higher returns + extra deductions.

• Tax Benefits:

  • Section 80C: Deduction up to ₹1.5 lakh.

  • Section 80CCD(1B): Extra deduction of ₹50,000 (exclusive for NPS).

  • Section 80CCD(2): Employer contribution up to 10% of basic salary (private) or 14% (Govt) is deductible.

• Withdrawals at Retirement (Age 60):

  • 60% Corpus: Tax-free.

  • 40% Corpus: Used to buy annuity (taxable pension income).

• Partial Withdrawal: Up to 25% of self-contribution tax-free.

📊 NPS Snapshot

4️⃣ Combining PPF & NPS: Maximize Tax-Free & Tax-Deferred Benefits

• Under Old Tax Regime:

  • Claim up to ₹2 lakh deduction (₹1.5 lakh from PPF/NPS + ₹50,000 from NPS).

  • Add employer NPS contribution (up to 10%/14% of basic salary) — an extra untaxed benefit.

• Under New Tax Regime:

  • Personal deductions removed, but employer’s NPS contribution remains tax-deductible.

  • PPF maturity & interest remain tax-free.

💡 Example:

5️⃣ PPF vs NPS: Financial Comparison

6️⃣ Expert Insights

• Balwant Jain, Tax Expert: “PPF interest and maturity proceeds are completely tax-free even beyond 15 years.”

• Abhishek Soni, Tax2win: “Combine PPF for safety and NPS for growth — the best of both worlds for a balanced, tax-efficient retirement.”

7️⃣ Ideal Strategy

• Step 1: Invest ₹1.5 lakh annually in PPF for guaranteed, tax-free returns.

• Step 2: Contribute ₹50,000+ to NPS (Tier I) to save more tax and gain equity exposure.

• Step 3: Opt for employer NPS contribution to leverage extra 10–14% salary deduction.

• Step 4: Stay invested long-term for compounding + stable retirement income.

8️⃣ Key Takeaways

• Combine PPF (Tax-Free + Safe) and NPS (High Return + Tax Deduction) for balanced financial planning.

• Achieve up to ₹2 lakh+ in annual tax savings under the old regime.

• Continue enjoying tax-free maturity and employer deduction benefits under the new regime.

📢 Disclaimer

The information provided is for educational and informational purposes only. It does not constitute financial or investment advice. Readers are advised to consult a qualified financial advisor or tax professional before making any investment decisions. The Profit India is not responsible for any financial losses arising from actions taken based on this article.