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Difference between EPF and PPF

by | Jun 20, 2024 | Income Tax | 0 comments

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Important Keyword: EPF, PPF.

Difference between EPF and PPF

When we step into the professional world, we often hear terms like PF, EPF, or PPF. Commonly referred to as the ‘Employee’s Provident Fund’, what exactly does EPF mean, and how is it different from PPF? Which one should concern you as a salaried individual? Let’s explore the differences between EPF and PPF to help you understand these investment schemes better.

What is EPF?

The Employee Provident Fund (EPF) is a social security scheme specifically designed for salaried employees in India. Often referred to simply as the Provident Fund (PF), this scheme mandates that a portion of an employee’s salary be deducted and contributed to their EPF account. By law, any company with more than 20 employees must register with the Employee’s Provident Fund Organisation (EPFO).

What is PPF?

The Public Provident Fund (PPF) is a government-backed, long-term savings scheme in India, created to provide individuals with a secure and tax-free investment option. PPF accounts have a 15-year lock-in period, after which individuals can choose to extend the account in 5-year blocks.

Here are the differences between Employee Provident Fund and Public Provident Fund

ParametersEPF (Employee Provident Fund)PPF (Public Provident Fund)
EligibilityAny Individual who is salaried and employed can be eligible to become a member of Employee Provident Fund scheme on the date of joining the employment.Any individual can open a PPF account with the assistance of nationalised banks or post offices.
Minimum InvestementEmployees who earn a basic salary of up to Rs. 15,000 contribution to Employee Provident Fund is mandatory. Typically 12% of the Basic, DA, and cash value of food allowances has to be contributed to the Employee Provident Fund account.You need to deposit a minimum of 500/- in order to open the account. The maximum amount you can deposit per annum is 1,50,000
Rate of InterestThe interest of 8.15% per annum is received by the employee having Employee Provident Fund. The rate is prescribed by the government and revised every year.You receive the annual interest of 7.10% in a PPF account. This rate is revised periodically by the Central Government.
Lock In PeriodThe accumulated amount in the Employee Provident Fund is paid at the time of retirement or resignation. It can be transferred from one account to another in case of a change in jobs.The entire amount saved through PPF can be withdrawn after 15 years. One can also extend it to the five years’ period.
WithdrawalPremature withdrawal in Employee Provident Fund will attract tax subject to certain conditions.In PPF premature withdrawal is allowed subject to certain conditions.
Tax ExemptionIf certain conditions are satisfied, then a lump sum amount received is exempt from tax.The amount received after the maturity period is completely tax-free.
Tax exemption u/s 80CInvestment in Employee Provident Fund is eligible for tax deduction under section 80C.Investment in PPF is eligible for deduction under section 80C and the interest earned on PPF account is completely tax-free.

Read More: Transfer Employee Provident Fund Balance: Step-by-Step Process

Web Stories: Transfer Employee Provident Fund Balance: Step-by-Step Process

Official Income Tax Return filing website: https://incometaxindia.gov.in/


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