When it comes to saving for retirement, there are a few different options available in India. Two of the most common are the Employees Provident Fund and the Public Provident Fund. Both have their pros and cons, but which one is right for you? Here’s a look at the differences between EPF and PPF.
What is Employees Provident Fund?
- Employees Provident Fund is a retirement savings scheme for the Employees’ Provident Fund Organisation. It is a mandatory savings scheme for all employees in the private sector. Employees contribute a certain percentage of their salary towards the Employees Provident Fund, and the employer also contributes an equal amount.
- The Employees Provident Fund is managed by the Employees’ Provident Fund Organisation, and it provides retirement benefits to employees. Employees can withdraw their Employees Provident Fund balance when they retire, or they can leave it invested for future growth. Employees Provident Fund is a long-term savings scheme, and it is one of the most popular retirement savings schemes in India.
What is Public Provident Fund?
- Public Provident Fund is a long-term investment cum saving scheme launched by the National Savings Institute of the Ministry of Finance in 1968. Any resident of India can open a PPF account with any post office or authorized bank branch. The account can be opened in the name of an individual or jointly with another person.
- A minor aged between 10 and 18 years can open and operate a PPF account with the consent of his/her guardian. Public Provident Fund offers many attractive features like sovereign guaranteed returns, safety, liquidity, etc. to its account holders. to its account holders. Public Provident Fund accounts are useful for meeting various financial needs like child’s education, marriage, etc. in the long-term.
Difference between Employees Provident Fund and Public Provident Fund
- Employees Provident Fund (EPF) is a retirement savings scheme for the employees of private sector companies, while Public Provident Fund (PPF) is a retirement savings scheme for all Indian citizens. Both schemes are managed by the Employees’ Provident Fund Organisation (EPFO). Employees Provident Fund offers an interest rate of 8.65% per annum, while Public Provident Fund offers an interest rate of 7.9% per annum.
- Employees Provident Fund has a mandatory contribution of 12% of the employee’s salary, while Public Provident Fund has a voluntary contribution of any amount up to Rs 1.5 lakh per annum. Employees Provident Fund can be withdrawn after 5 years from the date of joining the scheme, while Public Provident Fund can be withdrawn after 7 years from the date of joining the scheme.
- Employees Provident Fund can be used for purchase of residential property or for education of children, while Public Provident Fund can only be used for emergency expenses. Employees Provident Fund is best suited for employees of private sector companies, while Public Provident Fund is best suited for all Indian citizens who want to save for their future.
The Employees Provident Fund and the Public Provident Fund are two different types of savings schemes in India. While the former is meant for employees, the latter can be opened by anyone. The main difference between the two lies in their taxation benefits. EPF contributions are tax deductible, whereas PPF contributions are not. Additionally, the interest earned on PPF deposits is exempt from income tax, while EPF interest is taxable.