Life is full of uncertainties! So, it is advisable to plan your future in advance. And one such thing is to plan your retirement. Considered to be the safest bet, the Employee Provident Fund (EPF) and the Public Provident Fund (PPF) are the long-term investment instruments for retirement. Why considered the safest bet? Because of their slow, steady and secure nature. Here you can keep pumping in small amounts that end up in a big corpus by the time you retire. It is crucial for the working class to take the advantage of these instruments. Yet, many still get confused between the two options. Let’s discuss in detail the two investment options. 

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PPF Versus EPF 

PPF is a savings scheme offered by the central government. It was started with the aim to provide old age income security to self-employed individuals and workers from unorganised sectors. On the other hand, EPF is also a government-backed scheme and is a compulsory deduction for salaried employees. It is a fund to which both the employee and employer contribute 10 per cent of the employee’s basic salary each month. Earlier this percentage was 12 per cent for private organisations.

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The employer and employee deposit their contribution with the Employee Provident Fund Organisation (EPFO) every month. The accumulated or a part of the amount in an EPF account can be withdrawn by the employee in the event of retirement, or resignation, or in case of the COVID-19 crisis. Similarly, this amount can be transferred from one company to another in case the employee changes his jobs. 

Return on investment: In the case of PPF, the rate of return is 7.10 per cent per annum, while EPF accounts yield a return of 8.5 per cent annually. 

Investment tenure: For the PPF account, the deposited amount is locked in for 15 years can be withdrawn on maturity. On the other hand, in EPF, the amount is paid at the time of retirement or resignation, whichever occurs earlier. In case of a job change, the amount can be transferred from the previous company to the new one. 

Maximum Investment: In PPF, one can invest Rs 1,50,000 a year, whereas there is no cap on the investment if made through Voluntary Provident Fund (VPF). However, the employer’s contribution will remain the same.  

Tax Calculation: A PPF qualifies for tax exemption under Section 80C, which means there is no tax applicable on the maturity amount in this option. However, EPF investment qualifies for deduction under Section 80C. Similarly, withdrawal from an EPF amount is subject to tax if it is carried out within 5 years of employment with the same employer. 

If compared than EPF is more beneficial than PPF because EPF includes the employer’s contribution, whereas no such contribution occurs in PPF. However, PPF is a perfect option for people who are self-employed or are from unorganised sectors.