Difference between EPF and 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 EPF and PPF that will help you understand both these investment schemes better.

What is EPF?

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

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.

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 that handle PPF accounts.

Minimum Investment

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 8.5% 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. 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The entire amount saved through PPF can be withdrawn after 15 years.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.

Withdrawal

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

In PPF premature withdrawal is not allowed.

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

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.

Got Questions? Ask Away!

  1. 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.

  2. 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,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    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.

  3. 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.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.

  5. 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!

  6. 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.

  7. 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!

  8. 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

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