Public Provident Fund Vs Employees' Provident Fund: Interest Rates, Maturity Period, Key Details

Employees' provident fund or EPF and public provident fund or PPF, are two types of provident fund (PF) that reaps benefits at the time of maturity. While, EPF is a compulsory retirement saving option that is deducted from the salary of salaried individuals, PPF is invested by citizens and is optional. EPF is offered by retirement fund body EPFO or Employees' Provident Fund Organisation while PPF is offered by banks and post offices. Public Provident Fund (Amendment) Scheme, 2016 was introduced by the National Savings Organization in 1968 to mobilize small savings.

Here are key things to know about EPF and PPF account:

Eligibility

EPF is mandatory for deduction from the salaries of individuals by a company with more than 20 employees. A PPF account, on the other hand, can be opened by any resident Indian individuals, who may be salaried or non-salaried. However, it cannot be opened by Hindu Undivided Families or HUF.

Minimum/Maximum contribution

An employee contributes 12 per cent of his salary towards the EPF kitty, while an employer pays another 12 per cent, out of which 8.33 per cent is invested in the Employee's Pension Scheme (EPS) while the balance 3.67 per cent is invested in EPF. In case of PPF, a minimum of Rs 500 subject to a maximum of Rs 1,50,000 per annum can be deposited. The subscriber should not deposit more than Rs. 1,50,000 per annum as the excess amount neither earns any interest nor is eligible for rebate under Income Tax Act,

Interest rates

EPFO recently increased the interest rate on EPF to 8.65 per cent for the current financial year. Once approved by the Ministry of Finance, the move will lead to a higher return on EPFO contributions for the financial year ending March 31. In case of PPF, the interest rate is determined by central government on quarterly basis. At present it is 8.0 per cent per annum. 

Maturity period

EPF account can be closed while quitting job permanently. It can also be transferred while changing companies till retirement. The PPF account, on the other hand, matures in a period of 15 years. Thereafter, on application by the subscriber, it can be extended for one or more blocks of five years each.

Partial withdrawal

Partial withdrawal from EPF accounts is allowed for purchase/construction of house, repayment of loan, non-receipt of wage for two months, marriage of self/daughter/son/brother, for medical treatment of family members etc.  In case of PPF account, partial withdrawal is allowed every year from the seventh financial year from the year of opening account. That means the customer is allowed to withdraw from the account after 7 years of operating the account.