Get a detailed analysis of EPF Vs PPF. Know about difference, comparison, and which is better between the Employee Provident Fund (EPF) & Public Provident Fund (EPF).
Provident Fund (PF) or the Employee Provident Fund (EPF) is the monetary benefit you receive during retirement. All salaried employees who are a resident of India are eligible for receiving this benefit. Under this scheme, a portion of the employee’s salary is deducted and secured in the PF account. Any organization with more than 20 employees are liable to register in a Provident Fund Act.
This money is altogether given to the employee when he/she retires. The amount that can be deducted from the salary is decided by the government (12%). Apart from the salary deduction, the employer also pays an equal amount to their employee’s PF account.
Types of Provident Fund in India
There are 4 defined types of provident fund, they are:
Employee Provident Fund (EPF)
An EPF is a type of provident fund run by the EPFO (Employees’ Provident Fund Organization) under the Government of India. This scheme aims at providing retirement benefits and social security to the salaried employees of India. In this type of PF, an employee contributes a portion of their salary each month to their employer on a regular basis.
The employer after adding their contribution transfers the money to your PF account. You can opt to use the amount in your PF account to avail of a loan or save it for post-retirement expenses. Check Employee Provident Fund Eligibility Criteria.
Public Provident Fund (PPF)
Unlike a PF account, you do not need to depend on your employer to save money for your retirement. You can voluntarily save money on your own like other saving instruments. However, the benefits of investing in a PPF account is higher than that of the usual savings schemes.
PPF is issued under the Public Provident Fund Act 1968. In the PPF scheme, any Indian citizen and their children can contribute to the account. Also, the individual need not be a salaried person to open a PPF account. Under Section 80C you can get tax benefits. Even, you can get a high annual interest rate from PPF saving.
Statutory Provident Fund (SPF)
Statutory Provident Fund (SPF) is a savings scheme for the government or semi-government employees of educational institutions like schools and universities. A tax deduction is offered under Section 80C.
Unrecognized Provident Fund
Those provident funds that are not recognized by the Commissioner of Income Tax are known as an Unrecognized Provident Fund (URPF). Employers and employees build these schemes. URPF is not exempted from tax under Section 80C.
What is the Difference Between EPF and PPF
Provident Fund (PF)
- It is a type of savings account
- Only salaried employees are eligible
- The employee and the employer contribute together
- It is payable during the time of retirement. In case of death, it will be paid to the direct heir.
- Tax deduction up to Rs. 1,00,000 under Section 80C
- Withdrawal before 5 years is taxable
- You can make a premature withdrawal only for your daughter’s wedding or purchasing a house
Public Provident Fund (PPF)
- It is a type of Provident Fund
- Both self-employed and salaried employees are eligible
- Only one individual contributes
- It is payable after 15 years. This period can be extended to 5 years after maturity.
- Tax deduction up to Rs. 1,00,000 under Section 80C
- No tax is applied on the maturity of the account
- Premature withdrawal allowed between 3-6 years. Complete withdrawals permitted after 6 years
EPF Vs PPF: Which is the Best Choice?
From a PF and a PPF, the best choice would be to invest in a Provident Fund as you can share the amount you invest with your employer. Also, a PF/EPF offers higher interest rates compared to a PPF account (8.55%). The government determines the interest rate and the returns provided by a PF account.
|
Parameter |
EPF |
PPF |
|
Who can invest? |
Salaried employees of the recognised organisations |
All individuals, including those in the informal sector |
|
Contributor |
Both employee and employer |
Self |
|
Minimum Investment |
12% of the basic salary |
Rs 500 a year |
|
Maximum Investment |
No capping on the investment made through VPF, but the employer’s contribution will remain the same |
Rs 1,50,000 a year |
|
Current Rate of Interest |
8.5% |
7.10% |
|
Lock-in Period |
Till retirement |
15 years |
Also, Read This: How To Check PF Balance Online