EPF vs PPF, Which One Is Better? Can You Take Both Schemes Together, Check Details Here – News18

EPF vs PPF Comparison: Retirement plans supported by the federal government present people with various avenues to spend money on their future monetary stability. Among these choices, the Employee Provident Fund (EPF) and Public Provident Fund (PPF) stand out as favoured decisions for people aiming to fortify their retirement funds. Each scheme comes with distinct withdrawal rules, eligibility circumstances, and related threat elements that necessitate cautious consideration.

Both are authorities-managed financial savings schemes tailor-made for workers within the organised sector in addition to most people. Despite their obvious similarities and shared goal of building an extended-time period corpus for traders, quite a few distinctions set them aside. Variances in rates of interest, tenure, tax advantages, and different points characterise these financial savings devices otherwise.

Before making any investments, it’s essential to grasp the specifics of each EPF and PPF schemes. EPF is solely out there to salaried staff within the non-public sector, whereas PPF is accessible to people throughout each organised and unorganised sectors. Your resolution between EPF and PPF ought to align along with your lengthy-time period monetary aims, threat tolerance, and funding function.

EPF:

The EPF is an compulsory retirement financial savings scheme whereby each the employer and the worker make a contribution. These contributions are predetermined based mostly on the wage construction. While partial withdrawals are permitted, the entire corpus is accessible solely upon reaching retirement age. The scheme additionally affords tax benefits. EPF is especially effectively-suited to salaried people searching for a retirement-centric financial savings avenue.

• Mandatory for salaried staff: Both employer and worker contribute 12% of primary wage + dearness allowance.
• Higher rate of interest: Currently 8.25%, however can change.
• Limited liquidity: Difficult to withdraw funds earlier than retirement (besides below particular circumstances).
• Tax advantages: Contribution eligible for tax deduction below Section 80C.
• Managed by EPFO: Government-backed however publicity to the fairness market by 15% funding.

PPF:

PPF permits people to bolster their retirement funds whereas concurrently decreasing their tax burden. With a minimal tenure of 15 years, PPF permits partial withdrawals after a specified length. This funding avenue caters to each salaried and non-salaried people searching for a level of flexibility of their lengthy-time period financial savings technique.

• Voluntary scheme: Open to all Indian residents and NRIs.
• Lower rate of interest: Currently 7.1%, which may change if the federal government does it.
• Limited liquidity: Restricted withdrawals after 5 years, full withdrawal at maturity (15 years).
• Tax advantages: Contributions, curiosity, and maturity quantities are tax-free.
• Managed straight by the federal government: Offers increased security in comparison with EPF.

EPF vs PPF: Comparison

• Investment quantity: In PPF a person can begin with a minimal of Rs 500 and the utmost is Rs 1,50,000 in a monetary 12 months. On the opposite hand for EPF, a obligatory contribution of 12 % of wage, and DA is made. It could be elevated voluntarily.
• Tenure: PPF is for 15 years and is extendable after that for a interval of 5 years. The EPF account can solely be closed after retirement or after a subscriber stays unemployed for greater than two months.
• Tax profit: For PPF investments tax profit is accessible below Section 80C of the Income Tax Act. The maturity quantity can also be exempted from tax. The contribution to EPF attracts tax profit whereas withdrawal from EPF account earlier than completion of 5 years of employment can be taxable. The maturity quantity after retirement is tax-free.

EPF vs PPF: Drawbacks

PPF

• Partial withdrawal from PPF shouldn’t be permitted till 5 years have handed because the opening of the account. Even should you want cash for an emergency or stay unemployed, you can not withdraw from the PPF.
• Considering the 15-12 months maturity interval, PPF comparatively affords decrease rate of interest in comparison with different financial savings choices like Mutual funds or FDs over the identical length.

EPF

• Only salaried staff of the organisations registered with the EPFO are eligible to enroll below the scheme. Individuals who’re self-employed or retired will not be eligible.
• The EPF contribution is inflexible and set at 12% of the worker’s primary pay and DA matched by the employer with an equal share. You could contribute extra by VPF, however that may’t be lower than the EPF share.

PPF vs EPF: Can You Take Both Schemes Together?

Certainly, you may concurrently enrol in each PPF and EPF schemes. There are not any limitations on taking part in each, and it may be a prudent technique to diversify your retirement financial savings, capitalising on the distinct advantages every scheme supplies.

Benefits of taking each:

• Increased retirement corpus: Combined contributions and returns in each schemes can result in a bigger retirement fund.
• Diversification: Lessens dependence on a single scheme and affords safety towards potential market fluctuations in EPF.
• Flexibility: PPF affords extra management over contributions and withdrawals in comparison with EPF.
• Tax advantages: Utilise tax deduction below Section 80C by EPF and benefit from the tax-free advantages of PPF.

Consider your earnings and monetary targets when deciding how a lot to contribute to every scheme. Understand the withdrawal guidelines and tax implications earlier than making any choices. It’s at all times sensible to seek the advice of with a monetary advisor for personalised recommendation based mostly in your circumstances.

Disclaimer: The views and funding suggestions by specialists on this News18.com report are their very own and never these of the web site or its administration. Readers are suggested to examine with licensed specialists earlier than making any funding choices.