EPF and PPF: Difference, Comparison, Returns & Which is Better
PF is the popular name for EPF or Employees’ Provident Fund. It is a government established savings scheme for employees of the organised sector. The EPF interest rate is declared every year by the EPFO (Employees Provident Fund Organisation) which is a statutory body under the Employees’ Provident Fund Act, 1956. It is currently 8.55%. Only employees of companies registered under the EPF Act, can invest in the EPF or PF. Both the employer and employee are required to contribute 12% of the employee’s basic salary and dearness allowance every month to the EPF account.
PPF or Public Provident Fund is a government supported savings scheme. It is open to everyone – employed, self employed, unemployed or even retired. It is not mandatory and anyone can contribute any amount to the PPF subject to a minimum of Rs 500 and maximum of Rs 1.5 lakh per year. It has a fixed return which is set by the government every quarter. You can open a PPF account with the post office or most major banks. The PPF interest rate is reviewed every quarter. The current PPF interest rate is 8%.
EPF Vs PPF Comparison – Eligibility, Limits, Tenure, Interest Rate, Tax Benefits
|Eligibility to Invest||Any Indian, except for NRI. Includes students, self-employed, employee or retired persons||Only salaried employee of company registered under EPF Act|
|Investment Amount||Min Rs 500 and Max is Rs 1,50,000||Compulsorily 12 % of salary, DA. It can be increased voluntarily|
|Tenure||15 Years, extendable after that for a block of 5 years indefinitely||Can be closed while quitting job permanently. Can be transferred while changing companies till retirement.|
|Rate of Interest||8.0%||8.55%|
|Contributor to Fund||Self or Parent in case of minor||Both Employer and Employee|
|Tax Benefit||Contribution is tax deductible under Sec 80C. Maturity amount is also tax-free.||Contribution is tax deductible. Maturity amount is tax-free only on completion of 5 years.|
|Governing Act||Government Savings Banks Act, 1873 (earlier Public Provident Fund Act, 1968)||Employees Provident Fund And Miscellaneous Provisions Act, 1952.|
Safety – Both are safe due to statutory backing: But EPF is more risky due to equity exposure in it
Both the EPF and PPF are government backed savings instruments. The EPF is managed by a statutory body called the EPFO while the PPF is managed directly by the government. 15% of the fresh money collected by the EPFO every year is invested in equities. The rest is invested in government bonds. The EPFO declares the EPF rate every year based on the returns of the EPF corpus. The current EPF rate is 8.55% while the current PPF rate is 8%. Historically as well, the EPF rate has been slightly higher than the PPF rate. However the equity exposure in the EPF makes it vulnerable to market movements. A collapse in the market may make it difficult for the EPFO to maintain the EPF interest rate.