Mon. Jul 22nd, 2019

NPS, PPF, and EPF – Partial withdrawal differences

4 min read
Saving Schemes

Some of the most popular retirement, investment, and savings schemes in India are Public Provident Fund (PPF), Employees’ Provident Fund (EPF), and National Pension System (NPS). Some of the schemes are optional for employees while some are mandatory, depending on the type of employment.  

Given below are the ways through which partial withdrawal can be done on all three schemes: 

Public Provident Fund 

Public Provident Fund is a scheme that was initiated by the Indian Government and any individual can open a PPF account. Retired, unemployed, self-employed, and employed individuals can open a PPF account. It is not mandatory for an individual to open an account. Rs.500 and Rs.1.5 lakh is the minimum and maximum contribution an individual can make towards PPF in a year. The rate of interest is decided by the government on a quarterly basis, and the return is fixed. The rate of interest for a PPF account is 8% at the moment. 

PPF account withdrawals 

Given below are the conditions under which withdrawal is possible: 

  • Withdrawal amount under PPF is not taxable. 
  • Depending on the reason, partial withdrawal is possible. There are also certain grounds under which partial withdrawal can be made. Premature withdrawal is allowed in case of treatment for life-threatening diseases or serious ailment to the account holder, parents, dependent children, or spouse. However, relevant documents must be submitted.  For example, if you are unemployed, partial withdrawal is not allowed. 
  • Under Section 80C of the Income Tax Act, 1961, tax deductions can be availed for investments up to Rs.1.5 lakh. 
  • PPF withdrawals are possible only after 5 years from the date the account is opened. 
  • The interest earned on PPF and the PPF maturity amount is exempted from tax as well. However, it must be declared when filing for tax returns. 
  • Partial withdrawal can be availed from the 7th financial year.  

Employees’ Provident Fund 

The Employees’ Provident Fund was launched by the Government of India to help employees in the organised sector to save towards retirement. The Employees Provident Fund Organisation (EPFO) decides the Provident Fund (PF) interest rates on a yearly basis. Currently, the rate of interest is 8.65%. The employer and employee each make a contribution of 12% of the employee’s basic salary towards EPF. However, employees who are working for an organisation that is a part of the EPF Act can only invest in PF. The PF balance can be checked on the EPFO portal, via mobile app, by giving a missed call, or by SMS. 

EPF withdrawal 

EPF withdrawal is allowed under the below-mentioned conditions: 

  • Individuals can withdraw their PF amount if they are unemployed for 2 months or more. 
  • Under Section 80C of the Income Tax Act, 1961, tax benefits of up to Rs.1.5 lakh can be availed. 
  • Individuals can withdraw 75% of their PF amount if they remain unemployed for a month. 
  • If PF is withdrawn within 5 years from the date the account was opened, the amount that is withdrawn is taxable. 
  • Almost the entire corpus can be withdrawn once the individual reaches the retirement age of 58. The portion that is paid towards the Employees’ Pension Fund (EPS), which is paid as a pension, is taxable. 
  • Partial withdrawal is allowed under circumstances such as marriage, education, purchase or construction of a house, repayment of home loan, house renovation, and just before retirement. However, only a certain portion of the PF amount can be withdrawn and depending on the grounds of withdrawal, the PF account must be open for a certain number of years. 

National Pension System 

Introduced by the Central Government, the National Pension System (NPS) was initially introduced from 1 January 2004 for its employees, but from 1 May 2009, all Indian citizens were able to open an NPS account. NPS’s regulatory body is the Pension Fund Regulatory and Development Authority (PFRDA). Sometime back, the rules of withdrawal for NPS were changed by PFRDA to benefit its subscribers. Partial withdrawal from the Tier-I account can be done after 3 years from the date the account was opened. Initially, there was a mandatory 5-year gap that had to be completed between 2 partial withdrawals, but that has been removed. Three partial withdrawals of not more than 25% of the contribution are allowed. However, employer contributions are not included for partial withdrawals. Withdrawal from Tier-II accounts have no restrictions. 

NPS withdrawal 

Partial withdrawals from the NPS account is possible under the following conditions: 

  • To construct or buy a flat or residential house. However, no withdrawal can be done if you already own a house. 
  • For children’s marriage and higher education, partial withdrawal can be done. 
  • Withdrawals are allowed for starting a business or start-ups. 
  • Withdrawals can be made for treatment of critical illnesses or specific illnesses which are life-threatening in nature and wherein hospitalisation is required. Treatment can be either for the subscribers, their children, parents, or spouse. 
  • Withdrawals are allowed for medical and incidental expenses suffered due to disability. 
  • Under Section 80CCD (1), 80CCD (2), and 80CCD (1B) of the Income Tax Act, 1961, tax benefits up to Rs.2 lakh can be availed.  
  • Upon retirement, the entire contribution made towards NPS cannot be withdrawn. 60% of the contribution can be withdrawn, while the remaining 40% must be kept aside to receive a pension. 
  • In case individuals are not happy with the performance of the fund manager or pension scheme, they can change it. The option is applicable to both Tier-I and Tier-II account holders. 


Individuals can invest in NPS, EPF, PPF accounts to save money for the long term. The high returns offered by these schemes compared to other schemes make it popular to invest in it as well. Since they were launched by the Indian Government, these Saving Schemes are very safe to invest in. 

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