What is the difference between PPF and EPF?

What is the difference between PPF and EPF

The Government of India offers a variety of saving schemes to help individuals in saving money for their retirement. Public Provident Fund (PFF) and Employee Provident Fund (EPF) are two such schemes meant for retirement savings. Though the Indian Government backs both these schemes, they are entirely independent of each other. While EPFcontribution  is directly deducted from the salary of a person, investment on a PPF scheme depends on a person’s own choice.

What is a Public Provident Fund?

Public Provident Fund or PPF is a long term scheme which includes tax savings, returns and safety. PPF is a powerful tool and helps in creating long term wealth for investors. It is the safest and most popular investment scheme. It includes keeping aside a certain sum of money on a regular basis, for an extended period of time. 

While different banks offer different interest rates, PPF calculator helps in calculating the interest earned and the maturity amount .These rates can be calculated with a PPF account calculator and can be used to estimate the estimated corpus you would reach with the deposits made now. 

What is an Employee Provident Fund?

Employees’ Provident Funds or EPF is a scheme introduced under the Employees Provident Fund Scheme of 1952. The Central Board of Directors manages these funds with the help of an Employee Provident Fund Organisation or the EPFO. Under the Employment Provident Fund, every employee pays a certain amount, and the employer makes a similar contribution. On retirement, the final lump sum amount, including the employer’s contribution, is given to the employee with interest. 

Employment Provident Funds generally covers establishments with 20 or more employees. It helps employees in saving a fraction of their income that can be used in a later period.

Difference between PPF and EPF

In order to know which scheme is the most suitable for you, understanding the main differences between them is essential.

Eligibility Criteria

The Public Provident Fund or the PPF account is suitable for any citizen of India, excluding the NRIs. The person should be above 18 years of age. It is for everyone, including students, employees, self-employed or retired people.

The Employees’ Provident Fund is only for the salaried employees of the company, who are registered under the EPF Act. It is for the employees who have been working in the organisation with at least 20 workers.

Tenure of Investment

A Public Provident Fund has a tenure of 15 years from the time of opening the account. However, it can be further extended for a five years block. 

An employee can close his EPF account at the time of quitting his job permanently. This account can also be transferred with the changing of the company, until retirement. An EPF account remains active until the time of resignation or retirement of the employee. 

Rate of Interest

The rate of interest for a Public Provident Fund is 7.9%. It is decided by the Government of India every quarter.

The Employees’ Provident Fund is a savings scheme where the interest can be earned at a rate of 8.65%.

Tax Benefits

In the case of a Public Provident Fund, the contribution of a person is tax-deductible. The amount of maturity is tax-free.

While the contribution in an Employees’ Provident Fund is also tax-deductible, the amount on maturity is tax-free. This is the case only on the completion of 5 years.

The Amount of Investment

The minimum investment amount of a Public Provident Fund is Rs 500, while the maximum amount of investment is Rs 1,50,000.

Generally, an employee needs to contribute at least 12% of his salary in the Employees’ Provident Fund. They can also increase their contribution voluntarily.

The Governing Act

PPF or the Public Provident Fund is governed by the Government Savings Act of 1873.

The Employees’ Provident Fund is governed by the Employees Provident Fund and the Miscellaneous Provisions Act of 1952.

The Contributor to the Fund

In the case of a Public Provident Fund, the contribution is done either by oneself or a parent.

The contribution to a Employees’ Provident Fund is made by both the employer and the employee.

Premature Fund Withdrawal

In case of a Public Provident Fund, an employee can go for an early withdrawal if he has been for more than two months.

In a Public Provident Fund, the employee can withdraw only after five years. This is also allowed in case of any medical or educational expenses.

How to open an EPF Account?

An EPF account can be only opened by the employer. In India, it is mandatory for every employer to open an Employees’ Provident Fund account on behalf of his employees. It cannot be opened by an individual all by himself. In case an employee is changing his job, an EPF online can be transferred.

How to open a PPF Account?

Introduced in India in the year 1968, PPF helps in mobilizing small savings. It offers attractive interest rates and can be opened with any nationalised bank or a post office. A PPF account can be opened in any private bank as well. It just requires a person to submit his application form along with the appropriate documents. Later, he must provide a certain amount for opening his account.

This article helps the reader in understanding the fundamental difference between a PPF and an EPF account. While an EPF account benefits the employees and working-class of the society, a PPF account benefits all the citizens of the country. 

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