EPF and PPF are both provident fund schemes but have different purposes. What is better for you or what is better for exclusivly for employees? To understand the difference, you have to see the comparison.
Understand what is EPF?
EPF stands for Employees’ Provident Fund. This scheme applies to companies with 20 or more employees. Investing in EPF is mandatory for employees. Each month, both the employee and employer contribute 12% of their salary to the EPF account. For example, if your basic salary and dearness allowance total ₹50,000, ₹6,000 (₹3,000 employee + ₹3,000 employer) will be deposited into the EPF account each month. This amount grows over time with interest, resulting in a substantial sum upon retirement.
Understand what is PPF?
PPF stands for Public Provident Fund. It is a government-run long-term savings scheme. You can deposit between ₹500 and ₹1.5 lakh annually. The tenure of PPF is 15 years, and upon completion, both the deposit amount and the interest earned on it are credited to your account. The most important feature of PPF is that you also receive tax exemption on investing in it (under Section 80C of the Income Tax Act). Opening a PPF account is easy, and most major banks offer it online these days.
Investment in EPF is mandatory, while PPF is optional. EPF makes regular deposits based on salary and provides long-term benefits at retirement. In PPF, you can adjust your deposit amount according to your financial needs and also receive tax benefits. If you want to increase your savings and reduce your tax burden by retirement, investing additionally through PPF may be a better option.
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