EPF vs RD: Everyone wants their money to be safe and generate good returns. Two popular investment options are the Employee Provident Fund (EPF) and Recurring Deposit (RD). Both schemes are considered safe, but their objectives and benefits differ. Let’s understand in simple terms which scheme is better for you.

What is EPF?

EPF, or Employees’ Provident Fund, is a retirement savings scheme. If you work for an organization covered by the EPF Act, 12% of your salary is deposited into your EPF account each month. An equal amount is also deposited by your employer. This money accumulates during your employment and is received as a substantial sum upon retirement. The government sets the interest rate on EPF every year. For the financial year 2024-25, this rate is approximately 8.25%. This interest is tax-free, and the entire amount is safe because it is a government-guaranteed scheme.

What is RD?

RD, or Recurring Deposit, is a banking investment scheme in which you deposit a fixed amount every month. This scheme is available at both banks and post offices. RD interest rates vary by bank. On average, it offers an interest rate of 6% to 7.5%. The term of an RD can range from 6 months to 10 years. Upon maturity, you receive the deposit amount plus interest. This scheme is suitable for those who want to save small amounts regularly.

Comparison of safety and returns

Both schemes are safe because they are guaranteed by the government or a bank. However, EPF is safer because it is a government scheme and the interest rate is usually higher than RD.

EPF interest rate: 8.25 percent
RD interest rate: 6%–7.5%
Therefore, in terms of returns, EPF proves to be better than RD.

Tax Benefits

Investments in EPF are tax-free under Section 80C, and the maturity amount is also tax-free (if you’ve contributed for 5 years or more). However, the interest earned on RD is taxable, meaning you have to pay income tax on it. If you need money quickly, it’s easier to withdraw from an RD (though some penalties may apply). Withdrawing from an EPF is a bit more challenging, as it’s a long-term (retirement) scheme. However, partial withdrawals are allowed under certain circumstances (such as buying a home, marriage, or medical emergencies).

Who should choose what?

If you are a salaried person and want to create a long-term retirement fund, then EPF is better for you. If you are self-employed or want to make short-term savings, RD is a good option. Both EPF and RD are safe investments, but EPF offers greater benefits in terms of long-term growth and tax savings. RD is a simple and flexible option, suitable for short- and medium-term goals. If your goal is to build a retirement fund with safe and stable returns, EPF is the best option. However, if you want quick returns by saving a small amount each month, RD is also a reliable option.

Desclaimer: For any financial invest anywhere on your own responsibility, Times Bull will not be responsible for it.