What does ₹50,000/year produce in NPS Tier 1 vs PPF vs ELSS over 25 years?
Scenario
30% slab investor, identical ₹50,000 annual contribution to each instrument, 25-year horizon, FY 2026-27 rules
Inputs
- Tax slab %
- 30
- Horizon years
- 25
- Nps return %
- 11
- Ppf return %
- 7.1
- Elss return %
- 12
- Annual contribution INR
- 50000
Calculation
- 1.
NPS Tier 1 corpus at 11% over 25 yrs
₹50K × ((1.11)^25 − 1) ÷ 0.11 × 1.11 → ₹68.10 L
- 2.
NPS after-tax (60% exempt lump + 40% annuity@6% taxed at slab, NPV approx)
weighted avg → ₹59.00 L
- 3.
PPF corpus at 7.1% EEE over 25 yrs
₹50K × ((1.071)^25 − 1) ÷ 0.071 × 1.071 → ₹33.80 L
- 4.
PPF after-tax (fully exempt)
no tax → ₹33.80 L
- 5.
ELSS corpus at 12% over 25 yrs
₹50K × ((1.12)^25 − 1) ÷ 0.12 × 1.12 → ₹74.60 L
- 6.
ELSS after-tax (12.5% LTCG above ₹1.25L exempt over staggered redemption)
approx 8% effective tax on gains → ₹70.60 L
Conclusion
Post-tax terminal value: ELSS ₹70.6L ≈ NPS ₹59L lump-equivalent > PPF ₹33.8L. NPS additionally provides ₹15K/year tax saving via 80CCD(1B) — worth ₹3.75L over 25 years compounded.
Tradeoffs
NPS has 40% mandatory annuity at maturity at lower rates (5.5–7%) which drags effective return. PPF wins on certainty and EEE structure. ELSS wins on terminal corpus and liquidity but has 12.5% LTCG drag. For 30% slab investor, all three together produce the best overall mix.