Employees Provident Fund Vs Public Provident Fund
When it comes to saving to build a handsome retirement corpus, in order to lead the same life as today, after we are relieved from all our duties, EPF and PPF are the best among all the alternatives. They are considered the best because they generate guaranteed returns that are tax free too and its long term investment with lock-in-period does not let you discontinue or withdraw the amount before the maturity.
The restriction with EPF is that it is available to only salaried persons and the non employees, business men, professional or any other person does not get this facility. EPF is a fixed contribution in which a certain percentage of the employee's salary is deducted and credited to the employee's provident fund account and employer also contributes some amount. It is deducted till the employee retires.
PPF account can be opened by anyone among salaried employee, self-employed, businessman, professional or any other person. It is backed by Central Government. It also offers to make a lump sum investment in addition to invest in instalments maximum upto Rs 1.5 lakh per annum.
The main difference between PPF and EPF that you need to look at which might help solve the confusion are given in below comparison table:
Difference Between EPF and PPF
| Basis of Difference | Employees Provident Fund (EPF) | Public Provident Fund (PPF) | |
|---|---|---|---|
| Objective | To provide financial security to an employee after his service in the organisation and it is also considered most reliable retirement corpus | Vs | To avail tax rebate under sec 80C of Income Tax on deposits with guaranteed returns on investment |
| Meaning | A fixed contribution which is a certain percentage of the employee's basic salary plus D.A. is credited to the employee's provident fund account by the employee alongwith some contribution that is made by the employer to the employee's EPF account. | Vs | A long-term saving instrument established by the central government which generates tax-free maturity to provide the old-age income security |
| Eligibility | Only salaried individuals | Vs | Salaried employee, self-employed, businessman, professional or any other person can open it |
| Investible amount | 12% of the employee's basic salary plus D.A. and contribution of 3.67% of the employee's basic salary plus D.A. is also made by the employer | Vs | Investments in smaller and unequal units or in lump sum can be deposited to PPF account |
| Maximum Investment Amount | Fixed which is 12% of the employee's basic salary plus D.A. and an equal contribution is also made by the employer | Vs | Rs 150,000 per year |
| Interest Rates | Fixed- presently 8.8% p.a. | Vs | Fixed- presently 8.1% p.a. |
| Interest Rates Compounding | Annually | Vs | Annually |
| Interest earned is taxable | No | Vs | No |
| Liquidity | No | Vs | No |
| Tenure | Till retirement age of the employee | Vs | 15 Years, can further be extended in multiples of 5 years |
| Income Tax Rebate u/s 80C | Yes, upto Rs 1,50,000/- p.a. | Vs | Yes, upto Rs 1,50,000/- p.a. |
| Maturity | Tax Free, but in case the PF amount is withdrawn before 5 years of serviceby employee on resigning from the job then the amount will be taxable | Vs | Tax Free |
| Premature Withdrawals | Full EPF amount can be withdrawn on resigning from the job | Vs | Can be withdrawn from 7th financial year onwards from the opening of the account and only one partial withdrawal is allowed every financial year |
| Tax Deduction at Source | No | Vs | No |
| Risk | No | Vs | Safest Investment |