Difference Between EPF and PPF Explained with Meaning & Examples

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Provident funds are security funds that salaried employees can get from their organisations. Both public and private sectors offer provident fund schemes to their employees. These funds mainly provide security after retirement.

Hence, there are two types of provident funds, EPF and PPF. Follow the article to get insight into EPF vs PPF, their differences and other related information.

The full form of EPF is Employee’s Provident Fund, where both employee and employer contribute a monthly amount that accumulates into a larger amount. Employees can withdraw at the time of retirement or when quitting their job.

Under the Employees Provident Fund and Miscellaneous Act 1952, the working of the EPF is regulated. Further, EPFO or Employee’s Provident Fund Organization and employees can go to the official website of this organisation for any EPF-related issue.

PPF, or Public Provident Fund, is a well-known savings scheme plan provided by the government. The PPF holders enjoy a substantial amount of tax savings under 80C. Hence, the purpose of PPF is also similar to EPF, providing financial security after retirement.

In addition, a PPF account is quite profitable for the employees as it gives returns more than a savings account. However, a PPF account has a lock-in period of 15 years.

Check out the benefits of EPF and PPF for a more precise understanding of these accounts.

Benefits of EPF Account

The benefits one can get from an Employee’s Provident Fund account are as follows:

• Premature Withdrawal: The EPF holders are allowed to get a partial withdrawal from their EPF accounts. They can go to EPFO website and follow simple steps to apply for a partial withdrawal. Individuals can get this withdrawal for several reasons, such as medical treatment, higher education, house construction etc.
• Emergency Fund: EPF funds are an excellent option for emergencies. You can easily withdraw money by following proper guidelines and covering up your financial emergency.
• Retirement Security: EPF provides retirement security to the employees with a substantial amount gathered throughout their service period. Thus, it is future security for salaried individuals.
• Capital Appreciation: EPF holders get a pre-fixed interest on the EPF deposit. Further, they also get rewards at the time of maturity. Thus, it helps in the growth of an employee’s funds and increases capital appreciation.

Benefits of PPF Account

Some benefits of a PPF account are as follows:

• Low Risk: The Indian government regulates PPF. Thus, individuals can worry less about the security of their money. Further, the returns are also noteworthy. So, it is a great option for salaried individuals to invest and secure their after-retirement life.
• Applicable for Everyone: Both salaried individuals and self-employed persons can invest in PPF. Thus, everyone with proper earnings can get the benefits of PPF.
• Tax Exemption: Under section 80C, the investment in PPF is fully tax-exempted. Thus, one can enjoy a substantial tax benefit on PPF account returns.
• Minimum Investment and Maximum Returns: One can invest as less as ₹ 500 and up to ₹ 1,50,000 as per their financial capacity. Besides, individuals can either make a monthly payment or a lump sum deposit every year. On top of this investment, they will have a great return with a 7.1% tax rate.
• Loans: Individuals who have continued investing in PPF for 3 years are eligible for taking loans against this account. They can avail 25% of their PPF balance amount as an emergency loan for any purpose. In addition, after completing 6 years, they can also partially withdraw money from this account.

A brief discussion on the taxation process of PPF vs EPF is as follows:

• Individuals need to pay tax on the withdrawn amount from EPF if they withdraw it before the 5-year service period, but PPF withdrawal is entirely out of taxation.
• The tax deduction under 80C for both PPF and EPF accounts is 1.5 lakh per annum.
• Interest in EPF and PPF is tax-free.

The limitations of EPF and PPF accounts are as follows:

• Individuals cannot make a partial withdrawal before 5 years after opening a PPF account.
• Lock-in period of PPF is 15 years which is a long tenure for individuals.
• PPF has a less interest rate than EPF.
• Individuals who quit jobs and become self-employed they cannot access EPF accounts.
• EPF contribution remains the same every time, and employers can not contribute more or less than this fixed rate.
• EPF is only for individuals who have registered under EPFO, and this is not for self-employed or retired individuals.

Hope you have got a comprehensive idea of EPF vs PPF. Further, the article has also mentioned other important details, such as taxation and the benefits of these provident funds. Thus, you can consider this guide to gain proper knowledge of these security accounts and utilise them properly.