Life is unpredictable and proper planning will secure our tomorrow. The value of our hard earned money increases when we invest in funds like EPF or PPF which build corpus for better future. EPF known as Employee Provident Fund is a scheme where an employee has to contribute some amount and gets the return in the lump sum. In EPF an employer also pays the equal amount and receives with interest on retirement. EPF India offices have improved there working and are now providing online services also.
The second option is PPF known as Public Provident Fund comes under section 80C of the income tax act 1961. The PPF investments returns are tax-free which makes them suitable alternative for allocating the debt portion. It has low risk of default. A person with EPF account can also open a PPF account either in a bank or in a post office. NRI and NUF are not eligible to open a PPF account.
Both the options are very profitable and safe. It will be very beneficial if all the working individuals take advantage of these instruments. So it is important to know the difference between the two options.
Here are some points to show difference between EPF and PPF:
- ROI (return on investment)
EPF: EPF gives about 8.5% return.
PPF: whereas PPF accounts for 8.7% of return.
- Tax implication
EPF: EPF come under 80C of income tax act where the employee will be subjected to tax if it is withdrawn before 5 years of working with the same employer.
PPF: Here in PPF there is no tax till maturity. PPF comes under the section 80C.
EPF: There is no particular lock-in period. In EPF investment is paid at the time of resignation or retirement. Employee can hold the account till they receive salary.
PPF: In PPF maturity period is fixed which is 15 years but one can increase up to 5 more years.
- Loan option
EPF: Loan can be taken on EPF for personal use by disclosing suitable documents.
PPF: Loan can be taken on both the instruments but in PPF one can avail loan up to 50 percent of the balance of 4th years from 6th year onwards.
- Withdrawal facility
EPF: An individual can withdraw money for personal use by disclosing suitable documents.
PPF: while in PPF individual cannot withdraw money until completion of tenure.
- Investment amount
EPF: In EPF 12% of salary is compulsory and it can be increased voluntarily.
PPF: Here you can invest from Rs.500 to Rs.50,000
- Contributor to fund
EPF: Employee and employer both are the contributors.
PPF: If it is the case of guardian than parents or self.
Both the retirement investments options have there own pros and cons but one has to be careful while choosing it according to their needs. They show the different rate of return, tax policies but accumulate huge profit in the future.