Popular investment options in India for individuals seeking to build their savings over the long term include EPF and PPF. Eligibility, contribution, withdrawal rules, and features vary between the two schemes, although they both provide attractive interest rates and tax benefits. Can I have both EPF and PPF account?
Through this article we will compare PPF vs EPF in a detailed and easy to understand manner. These are excellent tools to strategically plan for your retirement years and you must know how to use them to your advantage. Read on to learn about the difference between EPF and PPF in order to make informed financial decisions for your future.
What is EPF?
Eligible employers must withhold a portion of their workers’ wages to contribute to the Employees’ Provident Fund (EPF). The employee’s and the employer’s portions of the EPF are deducted from this total. In its most basic form, the Employees’ Provident Fund (EPF) ensures that retired workers can continue living comfortably. The Employees’ Provident Fund and Miscellaneous Act, 1952 specifies that the EPFO supervises EPF.
Compared to regular savings accounts, the EPF account offers a substantially higher rate of return, which is a major selling point. Under Section 80C of the Income Tax Act, 1961, you can deduct your EPF contributions from your taxable income.
Eligibility Criteria
Some of the things you need to do to be a part of the EPF scheme are:
- Every Indian state has access to the EPF plan’s benefits.
- Anyone earning a salary of up to 15,000 is required by law to open an EPF account.
- To open an EPF account, workers whose salaries exceed Rs. 15,000 need the approval of the Assistant PF Commissioner.
- Companies with 20 or more employees are required to participate in the EPF.
- Participation in the EPF is voluntary for businesses with less than twenty employees
- Various benefits, including insurance and pensions, are available to employees who enrol in the employee provident fund (EPF) scheme.
How to Invest in EPF?
You can invest in EPF in 2 ways:
- Offline
- Online
Applying offline
- Through the company
Employers deduct most employees’ EPF payments automatically from their paychecks.
Employers are required to supplement their own EPF contribution with the employee’s EPF contribution, which must be withheld from the employee’s salary and deposited into the employee’s EPF account.
Providing your employer with your Know Your Customer (KYC) details is a requirement for employees to enrol in the EPF.
- Through Forms
Contributions to EPF can also be made by employees through paper forms that can be obtained from the finance or human resources departments of their companies.
Common pieces of information included in these forms include personal details, bank account details, and nomination details. The employer receives the forms after they have been filled out.
- Through postal services and banks
People who are self-employed or do not have a regular job can benefit greatly from the EPF because contributions can be made at certain banks or post offices.
Anyone interested in opening an EPF account must visit their neighbourhood bank or post office, as these institutions handle these kinds of transactions.
Applying online
- Member Access to the EPFO Portal
EPFO provides an online portal where members can access EPF contributions and other services.
After logging in with their password and UAN (Universal Account Number), users will have access to the EPFO member portal.
After they log in to their EPF account, they can do things like contribute online, download their passbook, and check their balance. You can start making an online contribution through the portal after you link your bank account to your UAN.
- Smartphone App
A smartphone app called ‘Umang’ (Unified Mobile Application for New-age Governance) is also available from EPFO that clients can use to access EPF services.
You can find the Umang app on Google Play and the App Store. To access it, just enter your UAN and One-Time Password.
The Umang app gives users access to their EPF account, where they can see their past transactions and how they can contribute online.
Maturity of EPF
When a subscriber reaches the age of 58, the EPF is deemed mature in terms of the maturity periods. There is a lump sum payout, which serves as a financial cushion for the retired or departing employee, offering a source of stability and support in the post-employment phase. The process involves submitting requisite forms to the Employees’ Provident Fund Organisation (EPFO) for the seamless release of accumulated funds.
What is PPF?
The Public Provident Fund is a famous example of a government savings scheme. You have many investment options under Section 80C, but this is one of the most well-known. The fundamental motivation behind creating PPF was to provide individuals working in any sector, including informal jobs, the freedom to save and invest small amounts whenever they pleased. Compared to a savings account, the PPF account offers a higher rate of return.
Investments in PPF accounts are, unfortunately, locked in for a period of fifteen years. There is a limit of 1,50,000 rupees per year or month for investments. A minimum of 500 rupees must be saved annually by each individual.
Eligibility criteria for PPF
In order to open a PPF account, you must meet the following criteria:
- To open a PPF account, one must be a permanent resident of India.
- An Indian national residing abroad may be able to maintain access to their PPF account.on behalf of their minor children, parents, or guardians
- There is a limit of one PPF account per individual.
How to invest in PPF?
You can invest in PPF in two ways:
- Offline
- Online
Steps to apply online
Follow the steps below to apply online:
- Step one is to log in to your bank account via your chosen online or mobile banking service
- Selecting the option to open a PPF account is the next step.
- Select “Self Account” as the next step if you use the account for personal purposes.
- Complete the application form by entering the required information.
- Decide how much money you want to deposit into the account each year.
- Complete the form and submit it. A one-time password (OTP) will be sent to the registered cellphone number. Use it to fill out the correct field.
- You must patiently await the formation of your PPF account. You might be able to find your PPF account number there. When you register, the email address you gave will be used to send you all the required data.
Steps to apply offline
Follow the steps below to apply offline:
- First, pick up an application form at any US Postal Service location or order one online.
- Once the form is filled out, attach a passport-sized photo and any other document required for Know Your Customer (KYC).
- Open a PPF account at the post office and put the initial sum in. Amounts ranging from Rs. 500 to Rs. 1.5 lakh rupees may be due annually.
- Once your application has been approved, you will receive a passbook granting access to your newly established PPF account.
Maturity period of PPF
When your PPF account reaches its maturity date in 15 years, you can extend it by 5 years at regular intervals. You must extend the tenure within one year of maturity.
FAQs
You can only put up to Rs. 1.5 lakh rupees into your PPF account every fiscal year. Interest and deductions under Section 80C of the Income Tax Act of 1961 would no longer apply once that threshold was crossed.
Yes, partial withdrawals are allowed from the EPF under specific conditions like medical emergencies, education, home loans, etc.
Partial withdrawals are allowed from the 7th year onwards for specific purposes like education, medical expenses, etc.
EPF vs PPF interest rate is calculated on the lowest balance in a PPF account for deposits made between the 5th and the last day of each month. This amount is subsequently added to the PPF account at the end of every fiscal year.
Your PPF earnings are directly correlated to your initial investment plus interest.
A PPF account does earn compound interest on both principal and interest.
EPF is managed by the Employees’ Provident Fund Organization (EPFO), a statutory body under the Ministry of Labour and Employment, Government of India.
PPF is managed by the National Savings Institute, which operates under the Ministry of Finance, Government of India.