Difference between EPF and PPF

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Hiral Vakil

EPF
PPF

Once we enter the professional world, the terms like PF/ EPF or PPF start colliding to our ears. Casually addressed as ‘Employee’s Provident Fund’, exactly what does EPF mean and how is it different than PPF? Which one should you be concerned with as a salaried individual? Here is a difference between the two investment options.

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Here are the differences between EPF and PPF:

EPF (Employee Provident Fund) PPF (Public Provident Fund)

Employee Provident Fund, EPF is also commonly known as Provident Fund, PF. It is the arrangement for the salaried individuals where a stipulated part of their salary is deducted and kept in their EPF account.

Public Provident Fund is a scheme open to those who don’t have a regular Salary. One can voluntarily decide to open it and manage it. Mostly, PPF is for the consultants, freelancers, or even the people who don’t have an assured income.

Any Individual who is salaried and employed can be eligible to become a member of EPF scheme on the date of joining the employment. 

Any individual can open a PPF account with the assistance of nationalised banks or post offices that handle PPF accounts.

Employees who earn a basic salary of up to Rs. 15,000 contribution to EPF is mandatory. Typically 12% of the Basic, DA, and cash value of food allowances has to be contributed to the EPF 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.

The interest of 8.65% per annum is received by the employee having EPF. The rate is prescribed by the government and revised every year.

You receive the annual interest of 8% in a PPF account. This rate is revised periodically by the Central Government.

The accumulated amount in the EPF 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. How to transfer EPF Balance? 

The entire amount saved through PPF can be withdrawn after 15 years. One can also extend it to the five years’ period.

Premature withdrawal in EPF will attract tax subject to certain conditions.

In PPF premature withdrawal is not allowed.

If 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.

Investment in EPF 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.

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FAQs

Can I have both EPF and PPF accounts?

Yes. You can have both EPF and PPF accounts on your name. You can also avail tax benefits on both of them.

What is the purpose of EPF and PPF account?

EPF is a retirement benefit plan for salaried individuals. While the PPF account is retirement benefit and old age income security for individuals who are self-employed.

Can I invest more than Rs. 150,000 in my PPF account?

No. The max limit of deposit in PPF account is Rs. 150,000 for a particular financial year. Even though you deposit more than Rs. 150,000 you will not gain interest on it. And the amount exceeding Rs. 150,000 will not even be exempted from tax.

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