Both Employee Provident Fund and Public Provident Fund are long term investment tools by investing in which you can secure your retirement days. These are secured and steady instruments of investments and they provide guaranteed returns on your savings. The major benefit of investing in these plans is that you start with a small amount of savings and end up earning a huge corpus of wealth when you retire.
What is PPF account?
A PPF account is an investment instrument which is particularly designed to provide old age income security to self-employed individuals and workers from unorganized sectors. It is a savings as well as investment scheme offered by the Government of India. A person can a minimum amount of Rs. 500 and a maximum of Rs. 1,50,000 in this scheme and get attractive returns which are tax free. The scheme is only open for the residents of India.
Comparison between EPF and PPF
The following difference are seen between EEP and PPF:
- The interest rate on investments in EEP is 8.75% while it is 8.70% for a PPF account.
- An EPF account can be withdrawn when you return or resign from job. But, the deposited amount in PPF cannot be withdrawn until maturity which is 15 years from the date of depositing the amount.
- An individual can avail loan against PPF accounts whereas a person can withdraw money from account to meet personal requirements.
- Returns earned from a PPF account are exempted from tax payment while investments done in EEP qualifies for tax deduction under Section 80C of the Indian Income Tax Act, 1961.
- The EPF account can be accessed by only salaried individuals while a PPF account can be opened by self—employed and workers of unorganized sectors.
EPF Vs PPF: Where to invest
Based on the above mentioned discussion we can say that EPF is comparatively more beneficial than a PPF account as apart from you, your employer also contributes to your EPF account. It is a kind of joint contribution towards future. But, there is no provision for such contribution in a PPF account.
Besides, you can withdraw your EPF amount as and when you need it for meeting personal requirements. But, you cannot do so when it comes to a PPF account. Only after maturity, you can withdraw funds from your PPF account . Also, interest rate offered by an EPF account is higher than what offered by a PPF account.