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
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.