EPF vs PPF, Which is Better? Know Difference Here

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EPF vs PPF – Every person worries for her/his future. For any common person, the savings are his real assets. EPF is a good saving scheme for government employees. Employees’ Provident Fund is a way to save money for urgent needs. 

In the case of EPF, the employees receive a fixed rate of interest, every year. The current rate of interest on the EPF account is 8.50%. Every month, employers and employees must pay 12% of the basic salary and dearness allowance in the EPF account.

Now, let us discuss PPF. Public Provident Fund gives benefits to the people after retirement. It is another government scheme for everyone. The minimum amount to contribute in PPF is Rs 500 and the maximum is Rs 1.5 lakh, every year.

The government decides a fixed rate of interest to pay on the PPF account every year. You can start a PPF account in any major bank or post office. Currently, the rate of interest on PPF is 7.1%.

Many people ask the question as EPF vs PPF, which is better. Well, both the schemes have their own benefits. In this blog, we will discuss the difference between EPF and PPF in detail with definition, benefits, and other factors.

Comparison between EPF and PPF

Employees’ provident fund and Public Provident Fund have benefits as well as drawbacks. Now, let’s discuss these schemes and look at their differences by considering various factors.

1. Liquidity

When we talk of liquidity, EPF is better than PPF. While in the case of PPF, you can withdraw money after the end of a period, EPF provides withdrawals anytime as per your wish.

How can you withdraw from EPF?

  • If you are unemployed for one month, you can pick 75% of the EPF amount.
  • In case, you start your business or become unemployed, you can still keep your money in EPF amount for 3 years. However, the interest on EPF is taxable.
  • You will receive a large amount of EPF at the age of 58 years. Some portion of your EPF amount goes to EPS.
  • You can withdraw money from EPF in case of emergency or immediate need. However, you have to give a valid reason for withdrawal.

How can you withdraw from PPF?

Type of PPF WithdrawalTime PeriodOn what groundsHow much?
On MaturityAfter 15 yearsAnyFull Amount
Partial WithdrawalAfter 6 yearsAny50% of the PPF balance
Premature ClosureAfter 5 yearsMedical, EducationFull Amount
PPF Withdrawal Rules

It is possible to get a loan against PPF account amount from the 3rd to 6th year after the date of opening the account.

In a comparison of ppf vs epf, empoloyees must choose EPF. It has more benefits than PPF.

2. Taxation

The second factor to consider is taxation. Withdrawals from EPF before 5 years of service are taxable while withdrawals and PPF interest is tax free.

You will get a tax deduction of up to an amount of INR 1.5 lakh every year in both EPF and PPF. Apart from that, you also get tax exemption on interest in both EPF and PPF.

In the case of taxation, PPF is better than EPF as it has more tax exemptions.

3. Rate of Interest

EPF has an interest rate of 8.5% while PPF account has an interest rate of 7.1%. EPF is better than PPF account while comparing epf vs ppf interest rate.

PPF vs EPF – Limitations

Now, we will discuss the drawbacks while making a comparison between epf vs ppf.

1. Limitations of EPF

  • Only employees who register under EPF act can invest in EPF. Retired people or self-employed people cannot invest money in EPF accounts.
  • EPF contribution is fixed including 12% of salary and dearness allowance from the account of both employer and employees.
  • If you withdraw the amount from EPF account before 5 years of account opening, it is taxable.

2. Limitations of PPF  

  • You cannot do partial withdrawals from PPF account before the expiry of 6 years.
  • While comparing ppf vs epf interest rate, PPF has a lower rate of interest than EPF. 
  • The entire PPF account balance can not be withdrawn before 15 years (minimum lock-in period for PPF)

Final words on EPF vs PPF

We discussed the major differences between epf and ppf in this blog. It is precise that EPF is better than PPF account in several ways. You can also invest your money in various other schemes of employees such as the National Pension Scheme and Voluntary Provident Fund.

You can compare epf vs ppf vs vpf vs nps and choose the one that suits your needs. 

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