Difference between EPF and PPF - Eligibility, Maturity & Tax Benefits
Saving for your future is important even if you don’t have a finance background. Two of the most popular options in India are the Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF). Though both are government-backed and help you build a corpus, they have key differences in eligibility, maturity, contributions and taxation.
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What are EPF and PPF?
- EPF is a mandatory savings + retirement scheme for many salaried employees in India. Both you and your employer contribute every month.
- PPF is a voluntary savings and investment scheme open to almost anyone (resident Indian citizens). You decide how much to contribute within limits.
Major Differences: Eligibility, Contributions & Maturity
Feature
EPF
PPF
Who can invest
Salaried employees whose employer is covered under the EPF Act.
Any resident Indian (self-employed, salaried, even unemployed).
Who contributes
Employee + Employer (employer must contribute a portion)
Only the account‐holder (or guardian, for minors) contributes.
Minimum/maximum contribution
Employee usually contributes 12% of basic + DA; employer’s share is separate.
Minimum deposit: ₹500 per year; Maximum deposit: ₹1.5 lakh per year.
Lock-in / Maturity
Generally valid until retirement or resignation; must complete at least 5 years of service for full tax benefit.
Minimum tenure 15 years from account opening; can be extended in blocks of 5 years.
Interest Rate & Returns
- EPF interest rate is announced annually by the government/EPFO and historically tends to be slightly higher than PPF. For example, for FY 2024-25 it was around 8.25%.
- PPF interest is set quarterly by the government; at one recent point it was 7.1%.
Thus, from purely rate perspective, EPF may give a higher return but you must also look at other features.
Tax Benefits & Conditions
- Both schemes allow you to claim deduction under Section 80C of the Income Tax Act (up to ₹1.5 lakh) for contributions made.
- For EPF:
- Withdrawals after completing at least 5 years of continuous service are tax-free. Withdrawals before may be taxable.
- For PPF:
- It enjoys “EEE” status: Exempt at deposit, Exempt on interest, Exempt at maturity meaning your contribution, interest earned, and maturity amount are all tax-free.
Which One to Pick & When
- If you are a salaried employee whose employer is covered under the EPF Act, then EPF is automatically a part of your savings and you get employer contribution, which boosts your corpus.
- If you are self-employed, running your own business, or want a savings scheme you control yourself, then PPF is very relevant.
- It is perfectly possible (and often wise) to have both keep your EPF via salary job, and also open a PPF account to diversify your savings and get the locked-in long term tax-efficient benefit.
Things to Keep in Mind / Limitations
- EPF: If you leave a job not covered by EPF or leave the workforce, the EPF account may stop accruing interest after some time.
- PPF: The lock-in is very long 15 years. Though you can extend, withdrawing early is limited and subject to conditions.
- Rates may change: While both are backed by government, interest rates are subject to change so keep checking.
- Contribution amounts differ greatly: With EPF you may have limited flexibility (especially for employer share) whereas with PPF you select amount (within cap) each year.
Summary
- EPF is a retirement savings tool tied to your salary job, with higher rate and employer contribution but limited eligibility and service-based conditions.
- PPF is a universal savings scheme open to all resident Indians, highly tax-efficient and flexible from the contribution side but with a long lock-in and slightly lower rate.
Which is “better” depends on your employment status, savings goals, time horizon and tax situation. If you are eligible for EPF, don’t ignore it. If you want personal control and long-term guaranteed tax-free growth, PPF is a strong pick.