Difference between EPF and PPF

Provident Fund
Provident fund is the government made compulsory scheme for every employee so that each and every employee enjoys the life after retirement. Here an employee puts a part of the salary monthly in to the account. Even the employer contributes the same part of the amount to the PF account of the employee. The amount is paid out later as a retire fund even it can be withdrawn in some situations or specific conditions.

Employee provident Fund:
Employee provident fund is administered by EPFO in India. Since bilateral agreements have been signed it covers both workers in India and other countries. EPFO is a statutory government body under the ministry of Labor and Employment.

It is the best for salaried people. This scheme is best savings scheme too. In this scheme the employer a makes a fraction of his salary contribute to the scheme monthly. This contribution done by group of people is invested in a trust.

Who is Eligible for EPF
The employee who belongs to India and salaried are eligible to take an account in EPF from the date of joining the job. As they become member of EPF they become eligible for provident fund benefits as well as insurance and pension benefits too.

How does Employee Provident Fund Work
The Employee Provident Fund (EPF) or simply Provident Fund (PF) is a long-term savings and pension instrument for all salaried persons in India. Any organisation having over 10 employees is required to register with the Employee Provident Fund Organisation (EPFO). For all employees in such an organisation who draw a basic monthly salary of Rs/- 6,500 or less, the PF is mandatory.

You as an employee contribute 12% of your Basic Pay towards your PF every month. This is typically deducted from your salary before being credited into your Bank. Your employer pays 12% of your basic and adds it to your account. That makes it 24% of your Basic Pay. In addition, the employer contributes to 1.61% towards charges an insurance scheme as explained below.

Not all the contribution goes to PF. Part of it goes towards administration charges (1.11% in all). Another part goes to the Employee Deposit Linked Insurance Scheme or EDLIS (0.5%). A portion goes to an Employee Pension Scheme or EPS (8.33%). The remaining (15.67%) goes to the PF itself.

Public Provident Fund
Public provident fund is a savings cum tax scheme introduced by National Savings institute of Ministry of Finance in 1968. The scheme is guaranteed by Government and the aim of the scheme is to mobilize small savings by offering an investment with reasonable returns. Balance in PPF account is not subject to attachment under any order or decree of court.

Who is Eligible for PPF
Individuals who are residents of India are eligible to open their account under the Public Provident Fund, and are entitled to tax-free return later.Non-resident Indians (NRIs) are not eligible for a PPF account. Hindu Undivided Family individuals cannot open a PPF account.

How does Public Provident Fund Work
The minimum amount is Rs.500 which can be deposited. The rate of interest at present is 7.8% per annum, which is also tax-free. The entire balance can be withdrawn on maturity. Interest received is tax free. The maximum amount which can be deposited every year is Rs. 1,50,000 in an account at present. The interest earned on the PPF subscription is compounded annually. All the balance that accumulates over time is exempted from wealth tax. Moreover, it has low risk – risk attached is Government risk. PPF is available at post offices and banks.

Difference between EPF and PPF?

Account Type:
The Employee Provident Fund, or provident fund as it is normally referred to, is a retirement benefit scheme that is available to salaried employees.In EPF account, both the employer and employee are responsible for managing the account.

The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.

Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices. The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.

Eligibility:
Employed and salaried individuals are eligible for EPF.Even minors can apply for a PPF account.

Withdrawal:
In EPF before retirement money can be withdrawn and in PPF no money is returned before maturity.

Interest:
The interest received on PPF is tax free. Investments in EPF is eligible for tax deductions.
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 unorganized sectors since EPF is not available to them.

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