You must have heard of two types of provident funds - employees 'provident fund or EPF and public provident fund or PPF. EPF is deducted from the salary of salaried individuals while PPF is invested into by citizens. Both help you save on income tax. However, while you do not have any say on EPF - whether you want to contribute for it or not - investing in PPF accounts is optional. EPF is offered by retirement fund body EPFO or Employees' Provident Fund Organisation while PPF is offered by banks and post offices.
Given below are the differences between EPF, PPF:
Interest rates: Interest rates on EPF are decided by the government every year. For fiscal 2017-18 interest rate on EPF was at a five-year low of 8.55 per cent. For fiscal 2016-17, it was 8.65 per cent while for 2015-16, it was 8.8 per cent. In 2013-14 and 2014-15 EPFO subscribers got an interest at the rate of 8.75 per cent each on their EPF contributions. In 2012-13, the interest was provided at the rate of 8.5 per cent.
Interest rate on PPF investments is decided every quarter. For the quarter ended June 2018, PPF investments will fetch interest rate of 7.6 per cent. PPF falls under exempt, exempt, exempt category which means the returns are exempt from tax, the maturity amount is tax-free and the main investment qualifies for a deduction under section 80C of the Income Tax Act.
Income Tax benefit: Both EPF and PPF are eligible for income tax benefits under Section 80 C of Income Tax Act, 1961.
Features of EPF, PPF: EPF is mandatory for deduction from the salaries of individuals by a company with more than 20 employees. You contribute 12 per cent of your monthly salary towards EPF. Anequal share of 12 per cent is paid for by your employer. Out of your employer's share 8.33 per cent is invested in Employees' Pension Scheme or EPS, also run by EPFO, while the balance is invested in EPF.
A PPF account can be opened by resident Indian individuals, salaried and non-salaried individuals. However, it cannot be opened by Hindu Undivided Families or HUF. PPF has a tenure of 15 years, which can be extended for another five years. You can avail a loan on PPF investments from third financial year. Premature withdrawal is permissible every year from seventh financial year from the year of opening account.
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