EPF Retirement Corpus vs PPF Returns: What Rs 5,000 and Rs 10,000 investments in both can give in 20 years; see calculations

Employees' Provident Fund Organisation (EPFO) runs this retirement scheme for private sector employees. Employees with at least Rs 15,000 monthly basic salary are eligible to make a monthly contribution to their EPF account. The amount is deducted from the salary every month. Their employee also contributes the equal amount to the employee's EPF corpus. 

The minimum amount an employee can contribute monthly is Rs 1,800. The maximum is 12 per cent of their basic salary and dearness allowance (DA). The employer's 3.67 per cent contribution goes to the employee's EPF, while the rest 8.33 per cent goes to the Employees' Pension Fund (EPS). From this fund, employees get a monthly pension post retirement. 

The current interest rate in the scheme is 8.25 per cent. EPF falls under the category of exempt-exempt-exempt (EEE), where investments up to Rs 1.50 lakh in a financial year, interest earned, and the maturity amount are tax-free. One can withdraw the corpus either at the retirement age of 58 years or before that under specific conditions. 

Public Provident Fund (PPF) is a scheme run by Post Office and banks. The current interest rate in the scheme is 7.1 per cent compounded yearly. PPF has a 15-year lock-in period. Hence, its purpose is to give people an investment option to create a corpus that can be used to meet long-term financial goals. 

The minimum amount in a PPF account is Rs 500 in a financial year, while the maximum is Rs 1.50 lakh. Deposits can be made one time, monthly, or in any number of instalments in a year. 

Like EPF, PPF also falls under the EEE category, where deposits, interest earned, and the maturity amount are tax-free. After 15 years, PPF account holders can extend their account for unlimited blocks of 5 years. Due to compound interest, investors in the long run use PPF as a tool to create a sizeable interest-free retirement corpus.

Since the employer also contributes to the EPF account, the contribution of an EPF account holder at Rs 5,000 a month will be Rs 12 lakh in 20 years. It will create an estimated retirement corpus of Rs 30,55,841.63.

If the monthly deposit is Rs 10,000, the contribution in 20 years will be Rs 24 lakh, and the estimated retirement corpus will be Rs 61,11,683.25. 

Since the scheme provides 7.1 per cent interest, a Rs 5,000 monthly investment in 20 years will grow to an estimated corpus of Rs 26,63,315.27.

At Rs 10,000 monthly deposit, PPF will generate an estimated corpus of Rs 53,26,630.54.