Income Tax alert: EPF vs PPF! And the winner is...! No, it is not what you think

Income Tax alert: Basic difference between Employees Provident Fund or EPF and PPF or Public Provident Fund is that EPF is mandatory as one needs to deposit a part of his or her basic salary into the EPF while the PPF is voluntary contribution that a salaried individual invests for income tax gains under Section 80C keeping his or her post-retirement in focus. In EPF, it's slightly difficult for an employed person to withdraw his or her funds while being employed in comparison to PPF as after six years of investment, one can withdraw his or her entire investment. When it comes to returns, in EPF, one gets 8.65 per cent returns while in PPF it's 7.9 per cent currently. 

Speaking on the EPF and PPF issue, Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants said, "EPF is not voluntary, it's mandatory for each and every salaried person and the recruiters deposit contribution under the Employees Provident Fund norms. So, your contribution to EPF is what you are getting deducted from your salary. In case of PPF, it's voluntary, as a salaried individual invests mainly for retirement planning."

SEBI registered tax and investment expert Jitendra Solanki said that PPF and EPF both give income tax deduction under Section 80C. And one can avail income tax deduction under this section up to Rs 1.5 lakh and your EPF is also a part of it. That's why your employer asks for your investment declaration ahead of the financial year to make provisions for your income tax deduction at source. So, a salaried person should note how much he or she is investing in EPF and then only make those investments which he or she is investing for tax exemption only."

However, Kartik Jhaveri was of the opinion that PPF is for those who have a smaller salary. Those who earn in lakhs per month might be depositing more than Rs 1.5 lakh to get income tax exemption under Section 80C. For such people, investment in PPF is of no use to get income tax exemption or for retirement planning. 

For these people, the most significant step that can be taken is to invest elsewhere. They should rather make contribution in VPF (Voluntary Provident Fund) and get near 0.75 per cent higher returns! 
Notably, those with smaller salaries too can gain from this step! In fact, those who have a smaller salary and are investing in PPF for their retirement corpus well, they too should think of investing in VPF.