Difference between PF and PPF Last Updated : 16 Oct 2019

The Public Provident Fund (PPF) is a type of Provident Fund account that provides both tax saving benefits and attractive returns on deposits which can be as low as Rs.500 and go up to Rs.1.5 lakh for tax savings.

The Indian government offers a number of long-term savings schemes to help earning individuals save money for their retirement. Two such retirement savings schemes are Employee Provident Fund (EPF) and Public Provident Fund (PPF). Understanding the key differences between these two savings schemes can help you invest in a suitable savings instrument.

Factors EPF PPF
Eligibility Employees working in an organisation with more than 20 workers Any Indian citizen aged 18 years and above
Maturity Period Account remains active till the employee resigns or retires 15 years from the date of opening the account
Interest Rate 8.65% (for FY2019-20) 8% (for Q1 of FY2019-20)
Deposit Limit Mandatory contribution by both the employee and employer - 12% of the employee’s basic salary + dearness allowance (DA) Minimum contribution of Rs.500 per year and maximum contribution of Rs.1.5 lakh per year
Scheme offered by Employees’ Provident Fund Organisation (EPFO) Select branches of public sector banks and the Post Office
Loan Facility EPF Advance can be availed of after completion of 5 years of service for the purpose of wedding, education, medical, or house construction expenses Loan against PPF for up to 25% of the PPF balance can be applied for between the 3rd and 6th financial years of opening the account

EPF Vs PPF

Comparison between EPF and PPF

  • PPF and EPF eligibility: EPF is available for the salaried class in India. In this scheme, the employee and employer make contributions (a fraction of the employee’s salary) to the EPF account regularly on a monthly basis. PPF is open to all Indian citizens. Any individual aged 18 years and above is eligible to invest in PPF.
  • PPF and EPF contribution: A certain percentage of the basic allowance money earned by the employee is contributed to the fund account by the employee and the employer. As of now, the employee contributes 12% while the employer contributes 3.67% to EPF and 8.33% to Employee Pension Scheme (EPS). In the case of PPF, you can make a minimum contribution of Rs.500 per year and a maximum of Rs.1.5 lakh. Contributions can be made in a maximum of 12 installments in a year.
  • PPF and EPF maturity period: PPF account matures after 15 years while EPF account maturity depends on the terms of employment of the account holder.
  • PPF and EPF premature fund withdrawal: Premature withdrawal is allowed in EPF if the employee has been unemployed for 2 months or more while in PPF, the account holder can opt for premature withdrawal after the 5th year and only if he or she needs the funds to take care of education or medical expenses for self or dependents.
  • PPF and EPF tax benefits: Proceeds from PPF and EPF are tax-free but EPF withdrawals before 5 years of continuous service are taxable. PPF falls under EEE (Exempt, Exempt, Exempt) status.
  • PPF and EPF account management: As both the employer and employee make contributions to the employee’s EPF account, both are responsible for managing the account whereas, in PPF, the account holder is solely responsible as he or she is the only contributor.
  • PPF and EPF partial withdrawal: You can avail of the partial withdrawal facility from the 7th year onwards, i.e. after the completion of 6 years from the date of opening your PPF account. If the EPF amount is withdrawn before the completion of 5 years of service, then the amount will be taxable, except in a few cases wherein the EPF amount will be exempted from tax. In case the account holder moves on to another job, the EPF account in the old company will be transferred to the new company. If the employee is unemployed for 2 months continuously, then he or she can choose to withdraw the EPF amount, however, the withdrawn amount will be taxable.

Different Types of Provident Fund

Listed below are the different types of Provident Funds available in India.

  • Employee Provident Fund: In Employee Provident Fund scheme, the employee makes contribution (a fraction of their salary) to the funds regularly on a monthly basis. The contributions made by a group of people is then pooled together and invested in a trust. The fund amount is later paid back to the retiree or they can choose to withdraw it after a certain period of time.
  • Unrecognised Provident Fund: This scheme is started between the employer and employee but is not approved by the Commissioner of Income Tax department.
  • Statutory Provident Fund: This fund is for employees of government sector, educational institutions and Universities.
  • Public Provident Fund: It is a provident fund where in self-employed individuals and children can make a contribution. Unlike other funds, the individual need not be salaried.

Conclusion

Building a significant retirement corpus will ensure that you lead a comfortable life during your golden years. You don’t have to compromise your lifestyle in the absence of a regular income when you have sufficient retirement savings. To help you make an informed decision when choosing a retirement savings scheme, let’s compare EPF with PPF.

EPF is a better option for salaried individuals owing to employer contribution and liquidity whereas PPF is best suited for self-employed individuals and individuals working in unorganised sector where EPF is unavailable.

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