EPF vs PPF: Which option will give you higher return on Rs 10,000 monthly investment for 15 years? Know here

EPF vs PPF: Employees' Provident Fund (EPF) and Public Provident Fund (PPF) are two guaranteed return investment options that investors use as retirement schemes. Both schemes have some similarities. They have long lock-in periods. Investments up to Rs 1.50 lakh in a financial year in each scheme are tax-exempted under Section 80C of the Income Tax Act, 1961. Both fall in the exempt-exempt-exempt (EEE) category, where investment, tax earned, and the maturity amount are tax-free. Both provide fixed interest rates subject to change. In this write-up, know what Rs 10,000 monthly contribution in each scheme will help an investor build a corpus in 15 years. Before that, learn more about EPF and PPF schemes. 

EPF

It's a retirement scheme for private sector employees.

The scheme run by Employees' Provident Fund Organisation (EPFO) offers an 8.25 per cent compound annual interest rate.

Employees earning a minimum basic salary of Rs 15,000 can become EPF members.

In the EPF account of an employee, both the account holder and the employee contribute.

The minimum contribution is Rs 1,800 a month, while the maximum contribution is 12 per cent of the basic salary and dearness allowance (DA).

The employer also matches the amount. Of the 12 per cent contribution from the employer, 8.33 per cent goes to the employee's EPF account, while 3.67 per cent goes to their Employee Pension Fund (EPS).

Since the maturity amount is tax free, the retirement scheme is an effective tool in India to help people gather a large retirement corpus.    

PPF

PPF is a small savings scheme run by the post office and banks.

The post office offers 7.1 per cent annual interest in PPF, which is compounded yearly.

The scheme has a lock-in period of 15 years. One can invest a minimum of Rs 500 and a maximum of Rs 1,50,000 in PPF in a financial year.

One can make any number of instalments in multiples of Rs 50 in a year.

But if a payment of at least Rs 500 is not made in a financial year, the post office can discontinue the PPF account, which can be revived before the maturity period.

One can also extend the account duration for further blocks of five years. 

What Rs 10,000 monthly contribution can give in EPF and PPF 

If your monthly contribution in EPF is Rs 10,000 and you invest for 15 years, your investment in that time frame will be Rs 18 lakh.

At 8.25 per cent compound interest, your total corpus will be Rs 35,96,445.50.

If you invest Rs 10,000 a month in a post office PPF account, at 7.1 per cent annual compound interest, your maturity amount in 15 years will be Rs 32,54,567.

Thus, you will get Rs 3,41,878.5 more in EPF.

But here, one thing that needs to be considered is that while in PPF, you can withdraw the maturity amount after 15 years, EPF is a retirement scheme, and the maturity age is 60.

However, both schemes offer the option of partial withdrawals.