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Difference Between Employee Provident Fund and Public Provident Fund

Employee Provident Fund vs Public Provident Fund

Provident Fund can be defined as financial support given back after retirement as a retirement benefit to the person who made the contributions from his salary or other investments during the time he/she was employed. They are of two different types; Provident Fund which is denoted as PF or as an EPF, Employee Provident Fund, and a Public Provident Fund which is denoted as PPF. A Provident Fund is basically a plan to provide financial security after retirement. These funds are provided in India.
EPF (Employee Provident Fund)

An Employee Provident Fund is a fund for people who are employed in a company. Any company with 20 or more employees is required to provide this fund to the employees and register with the Employees Provident Fund Organization. An EPF is supposed to have a contribution of 12 per cent of the salary of the individual, DA, and cash value for any kind of food allowance. The contribution percentage is set by the Indian Labor Law. The employer has to make a 12 per cent contribution too, but the employee can decide to contribute more than the 12 per cent.

The interest rate for the EPF was increased to 9.5 per cent for the year 2010-11. The accumulated amount of the EPF is repayable after retirement or after a resignation. It is payable to the heir after the death of the account holder. In cases if the employee changes his job, the EPF is transferred to the current company. The withdrawal of the fund is tax free if someone has worked for five or more years. But if five years have not been completed, then the withdrawal is taxed but not in cases of termination of a job due to ill health. The employee is eligible for Rs 100,000 limit deduction as per Section 80C. Loans can be taken on an EPF, and it can be withdrawn prematurely for a daughter’s marriage and buying a house only.

PPF (Public Provident Fund)
A Public Provident Fund is for everybody. It was started by the Central Government, and the fund is voluntary. It is for anyone who is willing to secure their finances for the future or after retirement. It is for salaried as well as for someone who is not salaried. A PPF can be opened by people not earning an income also. It is very important for people who are self-employed, for example, lawyers, doctors, businessmen, freelancers, etc. This fund works under the State Bank of India and India Post. The PPF account is very much like a savings account where a passbook is issued and the money is deposited in a bank. The only difference is that here the payment is assigned to a head Post Office. The minimum amount required to be deposited per year is Rs 500 and the maximum is Rs 70,000. The interest rate for a PPF is 8 per cent per annum. In a PPF, the amount that has been accumulated is repayable after a period of 15 years. A five-year extension is also given if chosen. No tax has to be paid on maturity. It is eligible for an Rs 100,000 limit deduction as per Section 80C. One can take a loan on the PPF from the third to sixth year of opening the account. The loan amount can be 25 per cent of the finances in the account. Fifty per cent of the balance can be withdrawn at the end of the fourth financial year.

Summary:

1.An EPF is for salaried people; a PPF is for all people whether salaried, not salaried, non- earning, self-employed, etc.
2.Twelve per cent of the basic salary has to be deducted from the employee, and the employer has to pay an equal amount for the EPF. The minimum amount is Rs 500 and the maximum is Rs 70,000 per year.
3.An EPF is repayable after retirement; PPFs are repayable after 15 years.


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2 Comments

  1. If I am a salaried person and having an EPF account in my name, can I open a PPF account with post office or any bank authorized for opening the account and contribute 1 lakh rupees more?

    • Your site is really excellent.
      Some feedback from me.
      It is nice to have tabular format( tabular comparision) to represent the differences.

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