EPF vs PPF: Which one is better and why


Employee Provident Fund (EPF) and Public Provident Fund (PPF) are long-term investment instruments for retirement. The beauty of these options lies in their slow, steady and secure nature. You keep investing small amounts and end up with a big corpus by the time you retire. It is very important for working individuals to take advantage of these instruments. However, a lot of people are often confused between the two options.

Here we'll take a closer look at the two investment options.

What are PPF and EPF?

PPF, a statutory scheme by the central government, started with the objective of providing old age income security to self-employed individuals and workers from unorganised sectors.

EPF, on the other hand, is a retirement benefit applicable only for salaried employees. It is a fund to which both the employee and employer contribute 12 per cent of the former's basic salary amount each month. This percentage is pre-set by the government.

Every year, the employer and employee deposit their contribution with the Employee Provident Fund Organization (EPFO). So every month, knowingly or unknowingly, 24 per cent of your basic salary is saved with the EPFO.

The amount accumulated in an EPF account can be withdrawn by the employee at the event of retirement or resignation. Also, this amount can be transferred from one company to another in case the employee switches jobs.

Now, as we have learned the basic difference between EPF and PPF, let's take a look at a few factors, based on which we'll be able to distinguish the two investment instruments further.

There are four factors we need to watch here:

Return on investment

Rate of return in case of PPF accounts is 8.7 per cent per annum while EPF accounts yield a return of 8.5 per cent annually.

Investment tenure

In case of PPF, the deposited amount can be withdrawn on maturity, which occurs after 15 years. It can be extended in blocks of 5 years for an unlimited number of times.

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 old company to the new one.

Loan option

Loans can be taken on both the instruments, but the conditions vary. In case of EPF, one can withdraw money for personal needs by disclosing suitable documents, while in PPF, one can avail a loan from sixth year onwards, of up to 50 per cent of balance in the 4 year.

Tax implication

A PPF qualifies for tax exemption under Section 80C, which means there is no tax applicable on the maturity amount in this option.

In case of EPF, investment qualifies for deduction under Section 80C. Withdrawal from an EPF amount is subject to tax if it is carried out within 5 years of employment with the same employer.

However, if you have not worked for at least five years with the same employer but the EPF has been transferred to the new employer, it is not taxed.


EPF is slightly more beneficial than PPF because of the following reasons:

  • Employer contribution: Employer contributes to fund in case of EPF, whereas no such contribution occurs in case of PPF.
  • Liquidity: An EPF holder can withdraw the amount for personal needs anytime by providing necessary documents, while one holding a PPF cannot do so till the completion of its tenure.

Though both the investment instruments have their own sets of pros and cons, by looking at the points given above we can clearly observe that EPF has the edge over PPF in terms of employer contribution and liquidity.

Salaried individuals, who have the option of contributing in EPF schemes, should ensure their contribution to the fullest extent.

PPF, however, is a good alternative for people who are self-employed or are from unorganised sectors since EPF is not available to them. is a leading personal finance portal.
Disclaimer: All information in this article has been provided by and NDTV Profit is not responsible for the accuracy and completeness of the same.

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