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ITR Filing 2026: When planning for retirement, most people invest in one or more schemes such as NPS, PPF, and EPF. While the objective of all three is to accumulate funds for retirement, the rules regarding tax exemptions, interest, and withdrawals differ. Additionally, the choice between the old and new tax regimes plays a significant role.

**Maximum Tax Exemption with NPS**

If you opt for the old tax regime, NPS can prove to be the most tax-efficient investment scheme.

Investments in NPS Tier-I qualify for a deduction of up to ₹1.5 lakh under Section 80CCD(1); this limit is part of the overall Section 80C limit. Furthermore, an additional deduction of ₹50,000 is available under Section 80CCD(1B). Consequently, one can claim a total tax deduction of up to ₹2 lakh through NPS.

If you choose the new tax regime, deductions for self-made investments are not available. However, if your employer contributes to the NPS, a tax exemption can be claimed under Section 80CCD(2) on an amount up to 14% of your basic salary and Dearness Allowance (DA).

At the time of retirement, 60% of the NPS corpus can be withdrawn tax-free. The remaining 40% must be used to purchase an annuity, and the pension received from it is taxable according to your applicable tax slab.

**Full Tax Benefits with PPF**

PPF is classified as an EEE (Exempt-Exempt-Exempt) category scheme. Under the old tax regime, investments in PPF qualify for a tax deduction of up to ₹1.5 lakh under Section 80C. Additionally, the interest earned is tax-free, and the entire maturity amount is also exempt from tax.

If you have opted for the new tax regime, tax deductions on new investments are not available; however, the interest earned and the maturity proceeds remain tax-free, just as before. Benefits of EPF for Salaried Individuals

EPF is a retirement savings scheme for employees working in the organized sector.

Under the old tax regime, an employee's EPF contribution qualifies for a tax exemption under Section 80C. Interest earned and withdrawals are also tax-free, provided certain conditions are met. However, premature withdrawal may attract tax liability in certain cases.

What is the difference between the old and new tax regimes?

If you opt for the old tax regime, you can avail tax-saving benefits across NPS, PPF, and EPF. Among these, NPS holds an edge as it offers an additional tax exemption of ₹50,000.

In contrast, the new tax regime does not offer Section 80C exemptions; therefore, investments in PPF and EPF do not yield tax deduction benefits. Even with NPS, tax exemption applies only to the employer's contribution.

Which scheme is better?

If your primary goal is maximizing tax savings, NPS under the old tax regime could be the better option. If you seek completely tax-free returns, PPF is a strong choice. Meanwhile, EPF remains a crucial component of retirement savings for salaried individuals.

However, financial experts believe that a balanced mix of all three can be more beneficial for effective retirement planning.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.