Difference Between EPF and PPF: Which Savings Scheme is Right for You?

When it comes to long-term savings and securing a stable financial future, the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) are two of the most popular investment options in India. Both are backed by the Government of India and offer tax benefits, but they differ in eligibility, purpose, and operation. Understanding the distinction between EPF and PPF helps individuals make better decisions for saving, retirement planning, and tax management.

What is EPF?

The Employees’ Provident Fund (EPF) is a retirement savings scheme regulated by the Employees’ Provident Fund Organisation (EPFO) under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. It is primarily designed for salaried employees working in the organised sector.

Under this scheme, both the employer and the employee contribute 12% each of the employee’s basic salary plus dearness allowance every month. The accumulated amount, along with interest, can be withdrawn upon retirement, resignation, or after a specific period of unemployment.

The EPF not only acts as a savings tool but also ensures long-term financial stability for employees after retirement.

What is PPF?

The Public Provident Fund (PPF), introduced in 1968 under the Public Provident Fund Act, is a voluntary, long-term savings scheme available to all Indian citizens, whether salaried, self-employed, or unemployed. It aims to encourage small savings while offering attractive, risk-free returns.

PPF accounts can be opened at designated banks, post offices, or online through net banking portals. The minimum annual deposit is ₹500, and the maximum is ₹1.5 lakh per financial year. The investment earns compound interest, and the maturity period is 15 years, with options to extend in blocks of five years.

Key Differences Between EPF and PPF

ParametersEPF (Employees’ Provident Fund)PPF (Public Provident Fund)

Eligibility	Salaried employees of registered organisations	Any Indian citizen (salaried, self-employed, or unemployed)
Managing Authority	Employees’ Provident Fund Organisation (EPFO)	Ministry of Finance, Government of India
Contribution	Both employee and employer contribute 12% of salary	Only the account holder contributes
Investment Limit	Based on salary; automatically deducted	₹500 to ₹1.5 lakh per financial year
Interest Rate	Decided quarterly by EPFO; currently around 8.25%	Set quarterly by the government; around 7.1%
Tenure	Till retirement or resignation	15 years (extendable in blocks of 5 years)
Withdrawals	Partial withdrawals under specific conditions	Partial withdrawals allowed after 5 years
Tax Benefits	Eligible under Section 80C; interest and maturity exempt under specific conditions	Fully exempt under EEE (Exempt-Exempt-Exempt) status
Loan Facility	Loans available against EPF under certain conditions	Loans available from 3rd to 6th financial year

Interest Rates and Taxation

The interest rate for EPF is generally higher than PPF, reflecting its focus on retirement benefits for salaried employees. For instance, EPF currently offers around 8.25%, whereas PPF offers around 7.1% per annum.

In terms of taxation, both fall under the EEE (Exempt-Exempt-Exempt) category — the contribution, interest earned, and maturity amount are exempt from tax, subject to certain conditions. However, premature withdrawal from EPF before five years of continuous service may attract tax.

Accessibility and Control

• EPF: The contribution process is automated for salaried individuals, as deductions are directly made from the salary. Employees can check their balance through the UAN (Universal Account Number) portal managed by EPFO.

PPF: This is a voluntary savings tool where individuals can decide how much to invest and when. It offers flexibility in deposits — you can invest a lump sum or in installments up to 12 times a year.

Withdrawal Rules

EPF Withdrawal Rules

EPF allows partial withdrawals under specific conditions such as:

• Medical emergencies
  
  
• Higher education or marriage of children
  
  
• Purchase or construction of a house

Retirement (after age 58)

Full withdrawal is permitted after retirement or if the employee remains unemployed for more than two months.

PPF Withdrawal Rules

PPF allows partial withdrawal only after the completion of five financial years from the date of account opening. The amount that can be withdrawn is limited to 50% of the balance at the end of the fourth year or the preceding year, whichever is lower. Premature closure is allowed only under special conditions like medical treatment or higher education.

Which One Should You Choose?

The choice between EPF and PPF depends on employment type and financial goals:

• For Salaried Employees: EPF is ideal as it ensures steady retirement savings with employer participation.

For Self-Employed or Unorganised Workers: PPF is more suitable since it doesn’t depend on employment status.

For Long-Term Stability: Both EPF and PPF can be maintained simultaneously for diversified and secure retirement planning.

Conclusion

EPF and PPF are both excellent long-term investment instruments that promote disciplined savings and ensure financial stability. While EPF is compulsory for salaried employees and offers higher returns, PPF provides flexibility and universal access. By understanding the fundamental differences between the two, individuals can choose the scheme that best aligns with their income type, risk tolerance, and long-term financial goals.