Employees' Provident Fund vs Public Provident Fund: Check interest rates, withdrawal rules of EPF and PPF

In India, the Employees' Provident Fund and the Public Provident Fund are some small saving schemes for salaried employees. In both these schemes, the employees save a fraction of their salaries that they can utilize for their retirement or otherwise, when they are unable to work. While both are small saving tools for employees, they function differently. The Employees' Provident Fund  or EPF is governed under the retirement fund body Employees' Provident Fund Organisation and is mandatory for all employees. Meanwhile, the Public Provident Fund or PPF was introduced by the National Savings Organisations in 1968. Here, the employee has the choice to open a PPF account or not.

Employees' Provident Fund (EPF):

Under the retirement fund body Employees' Provident Fund Organisation, EPF is like the social security scheme for individuals working in private companies. EPF is available in companies or firms that have more than 20 employees under the rules by law. An employee needs to invest 12% of salary under this scheme. An alternative choice of investing more than the basic 12% can be invested under the Volunteer provident fund. The employee also avails life insurance cover and can nominate a family member who can benefit from the corpus post the demise of the account holder. 

Currently, the rate of interest on the EPF account is 8.65%. 

A partial amount in the EPF account can be withdrawn on the account of marriage, education, purchase of property, home loan repayment, renovation or pre-retirement. The limit to the amount that can be extracted is subject to the reason of withdrawal and the tenure of the service of the employee. 

The EPF account can be closed when the employee quits the existing job and there is also an option of transferring the EPF account from one firm to another. This means that EPF account does not have fixed maturity period. It is simply a savings scheme for employees to have some funds saved for the future. If the employee withdraws after the retirement age of 60 years, the individual gains both the EPF as well as Employee Pension Scheme (EPS) funds. 

Public Provident Fund (PPF):

The saving scheme readily available for government employees, introduced by the National Savings Organisations in 1968. The PPF account benefits from attractive interest rates and returns exempted from tax. Individuals can invest minimum to Rs 500 or a maximum of Rs  1,50,000 per annum. If excess, the amount will not earn any interest on it. Moreover, the amount will not eligible for rebate under Income Tax Act.  

Currently, the rate of interest on the PPF account is 8%. 

Since it is a long term investment, the PPF account cannot be closed until the maturity period of 15 years. In other words, the account holder avails the returns as well as the entire amount standing only after the maturity period of 15 years. However, if an individual has a dire need for funds  can make pre-mature withdrawal from year 7 (or completing 6 years). For this, one just needs to make a declaration and fill Form C to avail the existing funds in their PPF account.