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PF is the commonly used name for EPF or Employees’ Provident Fund. This government-backed savings scheme is specifically designed for employees working in the organised sector. EPF interest rates are announced every year by the EPFO (Employees Provident Fund Organisation) which is the governing body as per the Employees’ Provident Fund Act, 1956. At present, the interest rate on EPF is 8.50%. Only employees of companies which are registered under the EPF Act can open an EPF or PF account and invest in the same. In this savings scheme, the employer and the employee must contribute 12% of the employee’s basic salary combined with dearness allowance every month.
PPF or Public Provident Fund is also a government-backed savings scheme. It allows investment from individuals who are employed, self-employed, unemployed and even retired individuals. This investment form is not mandatory and allows anyone to contribute any amount with a minimum requirement of Rs. 500 and upper cap of Rs. 1.5 lakh per year. PPF has a fixed return which is decided by the government every quarter. One can open a PPF account at the post office or through any of the major banks in the country. The ongoing PPF interest rate is 7.1%.
About Difference Between EPF and PPF
Any Indian citizen can invest in PPF, except NRIs
Allows investment from salaried employees of a company registered under the EPF Act
Min Rs. 500 and Max. is Rs 1,50,000 in a fiscal years
Mandatorily 12 % of salary, DA. The amount can be increased as per employee and employer agreement.
15 years, can be extended for 5 years at a time and indefinitely
Contributing employees can request to close the account permanently while quitting a job. Can also be transferred in case of a job switch.
Self or Parent in case of a minor
Both Employer and Employee
The contribution is tax-deductible under Sec 80C. Maturity amount is tax-free.
The contribution is tax-deductible. Maturity amount is tax-free after completion of a minimum of 5 years.
Government Savings Banks Act, 1873 (earlier Public Provident Fund Act, 1968)
Employees Provident Fund And Miscellaneous Provisions Act, 1952.
PPF and EPF are both government-backed schemes which are very traditional. These are used as tax-saving options that are covered under Section 80C of the Income Tax Act, 1961. The sovereign guarantee makes these schemes attractive and individuals can choose the one that best suits their needs.
1. Are EPF and PPF accounts the same?
EPF contribution is deducted from an employee’s salary, while PPF account can be opened by anyone who is employed or self-employed or even retired. Both the saving schemes offer income tax benefits. EPF is managed by the Employees' Provident Fund Organisation, while PPF comes under the management of post offices and banks.
2. Which is a better option, PPF or EPF?
EPF is a good choice for salaried employees because they also get employer contribution and better liquidity from EPF. PPF is ideal for businessmen, self-employed individuals and people in the unorganised sector.
3. Is NPS better than PPF?
While comparing the National Pension System and Public Provident Fund, NPS offers higher returns for the portion of the investment that is allocated to equity trading. PPF, on the other hand, offers fixed but guaranteed returns. However, it does not offer scope for added frills on the same investment amount.
4. Can PPF be considered a pension plan?
No, the Public Provident Fund (PPF) scheme cannot be called a pension plan, but rather, it is a long-term investment option backed by the Government of India. It offers a stable interest rate and returns which are not taxable.
5. Is it possible to transfer EPF to PPF?
No, transfer from EPF to PPF is not possible since both are unique and independent saving schemes.
6. Who all are eligible to invest in EPF?
Employees who are employed with companies registered under the EPF Act are eligible to invest in EPF. Companies that employ more than 20 employees have to mandatorily register for EPF scheme.
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