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calenderJan 20, 2025

EPF vs PPF

The difference between PPF and EPF lies in their purpose, eligibility, and contribution structure. While the Employees’ Provident Fund (EPF) is a mandatory retirement scheme for salaried employees, the Public Provident Fund (PPF) is a voluntary savings scheme open to all Indian citizens. Understanding these schemes can help you make informed decisions about your long-term financial planning.

What is EPF?

The Employees Provident Fund is a mandatory contributing savings plan designed to assist salaried individuals in saving for their post-retirement years. If you are an employee, a specific sum is taken out of your pay each month and transferred into your EPF account. In addition, the employer makes a concurrent contribution of the same amount.

The Employees' Provident Fund Organisation runs the program according to the Employees' Provident Fund and Miscellaneous Provisions Act of 1952.

As EPF Accounts yield more significant interest rates than regular Savings Accounts, this approach to long-term savings is quite alluring.

What is PPF?

The Public Provident Fund (PPF) is a voluntary, government-backed savings scheme encouraging long-term financial planning for all Indian residents, regardless of employment status. Regulated under the Government Savings Banks Act of 1873, it is accessible through post offices and select banks, making it ideal for self-employed individuals, homemakers, and those with irregular incomes.

PPF Accounts have a 15-year lock-in period, with an option to extend in 5-year blocks. Contributions range from ₹500 to ₹1.5 lakh annually, payable in up to 12 instalments or a lump sum. The scheme offers a fixed interest rate, currently 7.1%, revised quarterly by the government, ensuring secure and competitive returns.

Difference between PPF and EPF

Feature EPF PPF
Eligibility Salaried employees in EPFO-registered organisations All Indian citizens, except HUFs and NRIs
Contributor Employee and employer Self
Minimum contribution 12% of basic salary + DA ₹500 annually
Maximum contribution No cap for Voluntary Provident Fund (VPF) ₹1.5 lakh annually
Interest rate 8.15% 7.1%
Lock-in Period Till retirement 15 years
Tax Benefits Section 80C (with conditions) Under Section 80C, tax exemption of up to ₹1.5lakh, in a single financial year
Withdrawals Partial (specific conditions) Allowed from 7th year

Which is safer: EPF or PPF?

  • EPF offers higher interest rates, making it a better choice for long-term wealth accumulation.
  • PPF, with its flexibility and universal accessibility, is ideal for those without employer-sponsored savings plans.

Limitations of EPF and PPF

  • EPF: Limited to salaried employees; contributions are mandatory, and withdrawals before five years are taxable.
  • PPF: Has a more extended lock-in period of 15 years, with lower interest rates than EPF.

Taxation: PPF vs EPF

  • EPF: Tax benefits are available on contributions, interest, and maturity amounts if withdrawals occur after five years. Early withdrawals are taxable.
  • PPF: Offers complete tax exemption on contributions, accrued interest, and maturity amounts under Section 80C.
  • Also Read: Secure your future with a PPF Account

FAQs

1. Is EPF better than PPF?

EPF generally provides higher returns due to its higher interest rate but is restricted to salaried individuals. PPF is better for flexible savings and broader eligibility.

2. Can I have both EPF and PPF?

Individuals can maintain both accounts to diversify their retirement and savings portfolios.

3. Can I claim both PPF and EPF?

Yes, both schemes are eligible for tax deductions under Section 80C, subject to a combined limit of ₹1.5 lakh annually.

4. Is there a difference between EPF and PPF interest rates?

EPF has a higher interest rate (8.15% for FY 2022-23) than PPF (7.1% as of the latest quarter).

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.