Merely saving money is never enough. You need to invest it in the right places in order to appreciate your wealth. Various investment options where you can put your money and add to your savings are available. Two popular investment avenues are Employees’ Provident Fund (EPF) and Public Provident Fund (PPF). People often confuse them to be the same. However, they greatly vary from each other.
Let’s read about these two saving schemes in detail below!
What is Employee Provident Fund (EPF)?
The Employees’ Provident Fund (EPF) is a savings scheme under the Employees’ Provident Funds and Miscellaneous Act, 1952. It is run by the Employees’ Provident Fund Organisation (EPFO) and helps its beneficiary accumulate a good sum for their retirement.
Under this savings scheme, both the employers and the employees registered under the EPF Act need to compulsorily contribute 12% of the basic salary and dearness allowance of the latter towards the fund. About 8.33% of the employer’s contribution to the employee’s EPF gets credited in the Employee Pension Scheme. You can make use of an EPF calculator online to calculate your savings.
What is Public Provident Fund (PPF)?
Public Provident Fund (PPF) is also a retirement savings scheme offering a number of tax benefits to its holders. It was introduced by the National Savings Institute of Ministry of Finance in 1968. Unlike EPF which is open only to salaried individuals, PPF can be opted for by all individuals be it employed, unemployed, self-employed, or retired.
In order to get enrolled in the PPF, one need to make a minimum deposit of Rs. 500. The maximum contribution is capped at Rs 1.5 lakh in a year. Just like EPF, you can use a PPF calculator online and get an estimate for the amount of savings accumulated by you under a PPF.
EPF v/s PPF – A Detailed Comparison
|Employee Provident Fund(EPF)||Public Provident Fund (PPF)|
|Eligibility||Employees of a company registered under EPF Act||All Indian citizens|
|Contributor||Employer and employee||Investor only|
|Investment Amount||12% of the base salary and dearness allowance of the employee||Minimum: Rs. 500Maximum: Rs. 1.5 lakh per year|
|Withdrawal of Funds||Can be made after quitting a job. You can also transfer the funds while switching your job.||Funds from PPF cannot be withdrawn until maturity which is 15 years from the date of first deposit.|
|Fixed Rate of Interest for FY 22-23||8.10%||7.10%|
|Liquidity||More liquid as partial withdrawal are allowed if given conditions are met.||Less liquid as partial withdrawals are allowed after lock-in period of 5 years|
|Tax Benefits||Only the employee’s contribution towards EPF qualify for tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.||The entire amount invested in a PPF qualifies for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.|
Today, investing has become a necessity. It allows you to enjoy financial security in future by way of building wealth for yourself as well as for your next generations. One of the most popular investment segments in this regard is that of the retirement savings funds. It is highly important to stay financially independent during the golden years of your life so that you can continue to live your life on your own terms and as per your comfort level.