When it comes to long-term financial planning in India, two schemes dominate the conversation—EPF (Employee Provident Fund) and PPF (Public Provident Fund). These government-backed saving schemes not only help in wealth accumulation but also offer tax-saving benefits. However, they serve different purposes, target different segments of the population, and operate under different rules.
In this comprehensive guide, we’ll break down both schemes in a clear, chart-based, and bullet-point format, helping you make informed decisions that secure your future.
📌 What is EPF (Employee Provident Fund)?
Employee Provident Fund (EPF) is a retirement-oriented savings scheme managed by the Employees' Provident Fund Organisation (EPFO). It is mandatory for employees working in organizations with more than 20 employees, and it involves contributions from both employer and employee.
🔍 Key Features of EPF:
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Eligibility: Salaried employees earning ₹15,000 or more monthly
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Contribution: 12% of basic salary + DA by both employee and employer
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Interest Rate (2024-25): 8.25% per annum (subject to change yearly)
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Withdrawal: Allowed under specific conditions (retirement, unemployment, emergencies)
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Tax Benefit: U/S 80C up to ₹1.5 lakh; interest and maturity tax-free after 5 years
📌 What is PPF (Public Provident Fund)?
Public Provident Fund (PPF) is a voluntary long-term investment scheme initiated by the Indian Government for the general public. It is ideal for those seeking safe, tax-free returns and does not require employer participation.
🔍 Key Features of PPF:
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Eligibility: Any Indian citizen (salaried, self-employed, or unemployed)
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Contribution: Minimum ₹500 – Maximum ₹1.5 lakh annually
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Interest Rate (2024-25): 7.1% per annum (compounded yearly)
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Lock-in Period: 15 years (partial withdrawals after 6 years allowed)
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Tax Benefit: U/S 80C; interest and maturity amount are tax-free
📊 EPF vs PPF: Comparison Table
| Features | EPF | PPF |
|---|---|---|
| Eligibility | Salaried employees (organized sector) | Any Indian citizen |
| Contribution Limit | 12% of salary | ₹500 to ₹1.5 lakh/year |
| Employer Contribution | Yes (12%) | No |
| Interest Rate | 8.25% (2024-25) | 7.1% (2024-25) |
| Tax Benefit | Under 80C + tax-free returns | Under 80C + tax-free returns |
| Withdrawal Flexibility | After 5 years or under specific rules | Partial after 6 years; full after 15 |
| Who Should Invest | Salaried employees | Anyone looking for safe investments |
| Risk Level | Low (Govt. regulated) | Very Low (Govt. backed) |
💡 How Does EPF Work?
When you’re employed in a company covered by EPFO, 12% of your basic salary + DA is automatically deducted each month and deposited into your EPF account. The employer also contributes 12%, out of which:
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8.33% goes to the Employee Pension Scheme (EPS)
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3.67% goes to the EPF corpus
This fund earns compound interest annually, which is declared by the EPFO each year.
👍 EPF Benefits:
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Ideal for building a retirement corpus
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Compounding interest over long duration
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Premature withdrawal possible under specific conditions
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UAN (Universal Account Number) enables easy tracking and transfer of EPF accounts across jobs
💡 How Does PPF Work?
The PPF account can be opened at any post office or bank, including digital platforms. Contributions are flexible and can be made in lump sum or installments (up to 12 per year). The investment earns compounded interest annually, which is credited on March 31st.
👍 PPF Benefits:
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Ideal for risk-averse individuals
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Suitable for long-term goals like children's education, marriage, or retirement
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Offers loan facility after 3 years
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Extension available in blocks of 5 years after maturity
🔑 Key Differences to Know
1. Flexibility in Contribution
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EPF: Fixed at 12% of salary
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PPF: Flexible, choose any amount between ₹500 to ₹1.5 lakh/year
2. Lock-in Period
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EPF: Partial withdrawal possible after 5 years
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PPF: Full lock-in for 15 years
3. Returns
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EPF usually offers higher returns, but they are subject to annual revision by the government.
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PPF interest is lower but consistent and fully tax-free.
4. Control
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EPF: Managed by employer and EPFO
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PPF: Fully controlled by the individual investor
📈 Chart: Interest Accumulation Over 15 Years
Assuming an annual contribution of ₹1.5 lakh
Note: These are estimations based on current interest rates and compound annually.
🧠 Which One Should You Choose?
Choose EPF If:
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You are a salaried employee in an eligible company
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You want a higher contribution rate
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You’re building a solid retirement plan
Choose PPF If:
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You’re self-employed, a freelancer, or unemployed
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You want full control over investment
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You prefer flexibility and low risk
✅ Can You Invest in Both EPF & PPF?
Yes! In fact, it is a highly effective strategy to build a diversified and tax-efficient portfolio. While EPF builds your retirement corpus, PPF can fund your mid-to-long-term goals.
📝 Final Words
Both EPF and PPF are among the safest and most tax-friendly investment options in India. Whether you're planning for retirement or just looking to grow your money securely, combining these schemes can give you the financial freedom you seek.
Written by MD Farhan
