Once we enter the professional world, terms like PF/ EPF or PPF start colliding with 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 EPF and PPF that will help you understand both these investment schemes better.
What is EPF?
The Employee Provident Fund (EPF) is a social security scheme designed for salaried employees in India. It is commonly known as the Provident Fund (PF). Under this scheme, a certain percentage of an employee’s salary is deducted and contributed towards the EPF account. It is mandatory for any company with more than 20 employees by law to 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, designed to offer individuals a secure and tax-free investment option. Further, PPF accounts come with a 15-year lock-in period, and individuals have the option to extend the account in 5-year blocks after the initial period.
Here are the differences between EPF and PPF
| Parameters | EPF (Employee Provident Fund) | PPF (Public Provident Fund) |
| Eligibility | 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. |
| Minimum Investement | 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 |
| Rate of Interest | The interest of 8.15% 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 7.10% in a PPF account. This rate is revised periodically by the Central Government. |
| Lock In Period | 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. | The entire amount saved through PPF can be withdrawn after 15 years. One can also extend it to the five years’ period. |
| Withdrawal | Premature withdrawal in EPF will attract tax subject to certain conditions. | In PPF premature withdrawal is allowed subject to certain conditions. |
| Tax Exemption | 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. |
| Tax exemption u/s 80C | 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. |
FAQs
Yes. You can have both EPF and PPF accounts on your name. Also, you can avail tax benefits on both of them.
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.
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.
No, transfer from EPF to PPF is not possible since both are unique and independent saving schemes.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.