Difference between PPF and EPF

There are three major government-backed retirement schemes in India: Public Provident Fund (PPF), Employees’ Provident Fund (EPF), and Voluntary Provident Fund (VPF). Out of these, the first two are more popular investment avenues for salaried employees. 

 

While the net deposits in PPF have increased by almost 134% in the past decade, the adoption of EPF has also increased. The latter is indicative of the fact that EPFO has been adding over 14 Lakh net subscribers every month since November 2022. 

 

However, both these schemes operate differently in all major aspects, including interest rates, taxation, and withdrawal guidelines. So, read on to know more about the difference between EPF and PPF and which one would be better for you to invest in.

The following table provides a detailed account of the difference between EPF and PPF:

It is important to understand both these schemes closely. PPF is an investment-cum-savings scheme that allows you to earn stable returns to fulfil your long-term financial goals.

 

PPF comes with a lock-in period of 15 years, which can be extended after maturity in the blocks of 5-year periods. 

 

On the other hand, the EPF scheme allows employees to build a retirement corpus. Under the scheme, the employees need to contribute 12% of their basic salary. The employer makes a similar contribution toward the PPF account. 

 

As per the rules, all companies with a workforce of more than 20 employees are mandatorily required to opt for the EPF scheme.

 

The choice between PPF vs EPF depends on your financial goals and state of employment. For instance, if you are employed in a company having more than 20 workers, you will mandatorily have an EPF account.

 

Moreover, as the main purpose of EPF investment is to build a retirement corpus, this would be a better choice of investment if you are planning for your retirement. In addition, the PPF scheme comes with flexibility in terms of contribution. You can make contributions of any amount and whenever you want, a facility not available with EPF accounts.

 

However, when investing in the PPF scheme, note that this investment option has a strict lock-in as you can make a complete withdrawal only after 15 years of investment. 

 

To conclude, all three major provident fund schemes are one of the best investment tools for those salaried employees who are looking for risk-averse options. Because they carry a sovereign guarantee, these PF schemes offer stable and assured returns along with tax benefits. 

 

However, as each of these schemes comes with its own set of pros and cons, it is pertinent to research PPF vs EPF before investing. To make an informed choice, you compare returns provided by these schemes. Use the PPF Interest Calculator on Bajaj Markets to determine how much interest you stand to earn, along with the total amount receivable at maturity.