Difference Between EPF and PPF

EPF vs PPF
 

EPF and PPF are very similar to one another as they are both made for the purpose of obtaining funds at retirement. EPF is, however, mandated by government for any salaried employee, whereas PPF is a voluntary deposit that can be made by any salaried or non-salaried individual. Due to their similarities these two concepts are easily confused. The article offers a clear explanation of what EPF and PPF is and explains the various features of both. The article also offers a comparison between the two, highlighting their similarities and differences.

What is EPF?

EPF stands for Employee Provident Fund and is a retirement benefit fund that can be opened by any employee that receives a salary. According to the policies of the retirement scheme a percentage (generally 12%) of the employee’s basic salary will be deposited into the EPF fund on a monthly basis. Just as the employee, the employer also has to deposit a percentage (again, generally 12%) of the employee’s basic salary into the employee’s EPF fund, and these percentages will be set by the country’s government. Every month, 24% of the employee’s salary will be deposited into the EPF, and these funds are held by a government organization. Employees can also contribute greater than 12% to their EPF fund, but the employer is not bound to contribute an amount greater than 12%, which is required by law.

The funds in the EPF account receive high interest, which accumulates over the years until the funds are withdrawn. The funds in the EPF can be withdrawn by the employee at the time of retirement or can be obtained if the employee switches jobs. Employees can also switch their accumulated EPF funds to a new EPF account when switching employers instead of cashing out when switching jobs.

What is PPF?

PPF stands for Public Provident Fund and is a fund that is set up and maintained by a country’s government. The fund is open to any individual who wishes to maintain a fund for retirement purposes. Unlike EPF, the PPF can be opened by individuals who may or may not receive a fixed salary, such as freelancers, independent consultants and anyone who runs their own business or works or takes up temporary or contract basis work. The PPF account can also be opened by individuals who do not earn an income; however, a minimum deposit needs to be made per annum for the account to be maintained. There is also a limit to the maximum amount of funds that can be deposited. The funds in the PPF account will grow with interest and these funds can be withdrawn once 15 years are completed. However, the investment period can be extended further if required.

What is the difference between EPF and PPF?

EPF and PPF are both maintained for the same purpose; to open a fund that can be used by an individual once he reaches retirement. The major difference between the two is that, EPF is mandated for salaried individuals, and there is a specific percentage that must be deposited into the employee’s EPF account on a monthly basis. PPF, on the other hand, is not mandated and is maintained voluntarily and can be set up by an individual who may or may not receive a salary. The other major difference is that, EPF can only be withdrawn at retirement or when the person leaves their current job. PPF can be withdrawn any time between 15 years of funds maturity and retirement (after 15 years the fund can be extended for 5 years at a time for any number of times). The tax treatments of these funds are also quite different. Funds or interest on the PPF are not taxed, whereas EPF can be taxed if the funds are withdrawn before the completion of 5 years.

Summary:

EPF vs PPF

• EPF stands for Employee Provident Fund and is a retirement benefit fund that can be opened by any employee that receives a salary.

• PPF stands for Public Provident Fund and is a fund that is set up and maintained by a country’s government. The fund is open to any individual who wishes to maintain a fund for retirement purposes.

• The major difference between the two is that EPF is mandated for salaries individuals, and there is a specific percentage that must be deposited whereas PPF is not mandated and is maintained voluntarily and can be set up by an individual who may or may not receive a salary.