Difference between Employee Provident Fund and Public Provident Fund

Difference Between EPF and PPF: Public provident fund and employee provident fund are some of the best long-term investment instruments for retirement. In fact, there are various pension plans in India available in the market.

The main reason behind the popularity of these options is their secure and slow but steady nature. The person keeps investing some amount of money and creates a strong financial corpus by the time he or she retires. Employees consider availing pension plan benefits over mutual fund huge returns.

Still, some people prefer to invest in old age pension plans. Working individuals must know how to take benefits from these instruments. But, the majority of people are unable to differentiate between employee provident fund and public provident fund.

PPF is a statutory plan offered by the central government with the objective of giving old age financial protection to self-employed individuals as well as workers from unorganized fields. On the other hand, retirement benefits of EPF are availed only by salaried employees.

Employer and employee contribute around 12 percent of the employee’s basic salary amount per month to create this fund. The percentage is pre-set by the government. Employee and the employer both deposit their contribution every year with the EPFO. It means nearly 24 percent of basic salary is saved with the Employee Provident Fund Organization.

Employees can withdraw the accumulated amount in EPF accounts at the event of resignation or retirement. In PPF, the return rate is around 8.7 percent per annum and EPF accounts offer a return of nearly 8.5 percent.

PPF account holder can withdraw deposited amount on maturity i.e. after 15 years. But, the period can be extended in blocks of five years for an unlimited number of times. The EPF accountholder will get the accumulated amount at the time of resignation or retirement.

If the person gets a loan on his EPF account, then he can withdraw the number of personal requirements only after submitting certain documents. PPF account holder can apply for a loan on his account from sixth year onwards. PPF offers tax exemption under Section 80C and no tax applicable on the maturity amount.

EPF investments eligible for deduction under Section 80C and withdrawal amount is subject to tax if carried out within five years of employment with the same employer.

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