EPF vs PPF- Which one is the best savings option?


There are numerous ways in which you can save money for your future. A few options among them are fixed deposits, recurring account deposits, PPF, PF, etc. For salaried professionals, both PPF and PF/EPF are considered the best options to save for the future or for the post-retirement phase.

By investing in EPF or PPF, the contributor can get tax benefits along with getting competitive interest rates, minimum deposit value and more.

In this blog, we will look into the difference between PPF and EPF and understand where to invest first.

What is PPF or Public Provident Fund?

PPF or Public Provident Fund is a scheme that allows the individual to save a part of his/her income annually, in order to build post-retirement savings or retirement corpus. The amount deposited into the PPF scheme makes an individual eligible to receive tax-saving benefits and interest on the principal amount. PPF is a great option for those who don’t fall under the Employee Provident Fund Organization (EPFO) to save and build a retirement corpus. A tax benefit of up to Rs 1.5 lakh under Section 80C of the Income Tax Act can be availed through the PPF scheme.

What are the benefits of a PPF account?

Written down a few numbers of benefits one can avail from a PPF account

  • The interest on PPF balance is compounded yearly
  • PPF account offers a tax deduction of up to Rs. 1.5 lakh
  • The minimum amount to deposit in a PPF account is Rs. 500 only
  • PPF lock-in period is 15 years. The duration makes it a good option to save a good amount of money for a longer period of time
  • Partial withdrawal is allowed after the completion of the 6th financial year
  • Loans can be availed from the PPF account
  • PPF tenure can be extended in the block of 5 years

Who can open a PPF account?

Listed below are the people who are eligible to open a PPF account

  • Only Indian citizens are eligible to open a PPF account
  • An Indian citizen settled abroad can continue operating his/her PPF account
  • Parents/guardians on behalf of their minor children can open a PPF account

List of forms associated with PPF scheme

Following are the forms that are required to be used when opening a PPF account or to avail its related services-

Form ATo open a PPF account
Form BTo make a deposit into the account or to make repayment of the loan
Form CTo obtain the partial withdrawal
Form DTo request a loan
Form EFor making a nominee
Form FFor making changes to the account details
Form GTo claim funds in the account either by a legal heir or nominee
Form HFor extending the tenure of the account

What is EPF or Employee Provident Fund?

EPF or PF is called the Employees’ Provident Fund. It is a savings scheme initiated by the government for employees who come under the organised sector. The interest rate charged on EPF is declared every year by the Employees Provident Fund Organisation. Employees who are registered under the EPF Act can only invest in the EPF scheme. Currently, the interest rate on EPF has been fixed at 8.5% for the financial year 2019-2020. Under the EPF scheme, both the employee and employer need to contribute 12% of the employee’s basic salary and dearness allowance every month to the account.

What are the benefits of EPF?

Listed below are a few of the benefits of EPF-

  • EPF builds a retirement savings corpus that can extend contributor’s financial security and independence during the post-retirement period
  • EPF funds can be used for emergencies
  • The contribution made into the EPF account is eligible for tax exemption under the Section 80C of the Indian Income Tax Act
  • The EPF account helps in saving a good amount of money as the amount cannot be withdrawn easily. One needs to fill in the reason to withdraw money
  • The fund accumulated in the EPF account can be used in case of unemployment to meet the expenses
  • There is flexibility to withdraw 75% of the amount after resigning from the job after one month, whereas the remaining 25% of the amount can be withdrawn after two months
  • In case of an employee’s death, the EPF amount can be given to the nominee
  • If in case the employee is not in the condition to work anymore can use the fund in the EPF account to meet the needs

Who can open an EPF account?

Following list of people can open an EPF account-

  • Salaried professionals can open an EPF account
  • Organizations with 20 or more employees are required to register for the EPF scheme
  • EPF scheme is not available for people residing in Jammu & Kashmir

List of forms associated with EPF scheme

Forms that are associated with the EPF scheme are-

Form 31For EPF withdrawal
Form 10DTo claim monthly pension
Form 10CTo claim withdrawal benefits/scheme certificates of EPS
Form 11To transfer EPF account
Form 14To buy LIC policy
Form 19For final Employees’ Provident Fund Settlement
Form 20To settle EPF amount in case of employee’s death
Form 2Declaration and nomination form of EPS and EPF
Form 15GTo save TDS on the internet income on EPS
Form 5For new employees registering for EPS & EPF
Form 11To auto-transfer EPF

Difference between PPF and EPF

PPF and EPF both offers tax savings benefits, helps in building retirement corpus and encourages savings habits; however, there is a list of difference between PPF and EPF written below-

EligibilityIndian residentsSalaried professionals of a company registered under EPF Act
Amount to investMinimum amount- Rs. 500Maximum amount- Rs. 1.5 lakhCompulsorily 12% of salary
Can be increased voluntarily
Tenure15 years
Can be extended in the blocks of 5 years
Can be closed after resigning
Can be transferred to other firms till retirement
ContributorSelfParents/guardians on behalf of their minorEmployee and employer
Interest rate7.1%8.5%
Tax benefitContribution is tax-deductible under Section 80C of the Income Tax ActAmount after maturity is tax-freeContribution is tax deductible
Amount after maturity is tax-free only after the completion of 5 years
WithdrawalPartial withdrawal is allowed after the completion of 6 financial yearsUpon unemployment75% of the amount can be withdrawn after unemployment
Rest 25% of the amount can be withdrawn after 2 months
Nature of the accountSavings schemeRetirement-cum savings scheme
Circumstances to withdraw the amountOn maturityPartial withdrawal under educational or health-related issuesComplete withdrawal
On retirement
In case of unemployment
Switching from one profession to another (duration of the job should be 2 months)Partial withdrawal
For higher education
For wedding
To purchase a house or land
To repay the home loan
To renovate a house property

EPF vs PPF- Which one to choose?

EPF, Employee Provident Fund is typically a scheme for salaried professionals to save a percentage from the salary to build a retirement corpus. The amount can be withdrawn from the account in case of unemployment or due to certain conditions. When choosing EPF, the hassle of saving an amount every month from the savings account is eliminated as the amount directly gets deducted from the salary itself.

PPF, Public Provident Fund, on the other hand, is a great option for those who would want to build a voluntary retirement corpus for a lock-in period of 15 years. One can take a loan against the deposited amount, whereas the tenure can also be increased, but in the block of 5 years.

Can I open an EPF account for my child?
EPF accounts are meant for salaried employees and for the organizations that have registered themselves under the EPF scheme.
Is it possible to open a PPF account for my minor?
PPF account can be opened by parents/guardians on behalf of their minor.
What is the maturity period of EPF and PPF?
The lock-in period of the PPF account is 15 years whereas the EPF maturity period remains on till retirement.
Is it possible to withdraw money from the EPF account?
The amount from the EPF account is possible in case of unemployment or switching one job from another or at the time of retirement.
What is the current interest rate on the PPF account?
Currently, the interest rate on the PPF account is 7.1%.
What is the current rate of interest on the EPF account?
The current rate of interest on the EPF account is 8.5%.
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