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EPF vs PPF – Which is better?

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epf vs ppf

Employee Provident Fund (EPF) and Public Provident Fund (PPF) are long term investment instruments for retirement. The beauty of these options lie in their slow, steady and secure nature. You keep investing a small amount and end up with  a big corpus by the time you retire. It is very important for every working individual to take advantage of these instruments. However a lot of people are confused with the argument of EPF vs PPF. We clarify all your doubts.

Public Provident Fund (PPF)

PPF is a statutory scheme of the central government started with the objective of providing old age income security to the unorganized sector workers and self employed persons

Employee Provident Fund (EPF)

Employee Provident Fund (EPF) is a retirement benefit applicable only for salaried employees. It is a fund to which an employee and employer contributes 12% every month (Pre-set by the Government of India) of the employee’s basic salary. Every year, the employer deposits with the Employee Provident Fund Organization (EPFO), the contribution from the employer and the employee. Knowingly or unknowingly, 24% of your basic salary is saved every month. Amount accumulated in the EPF account can be withdrawn to the employee at the time of retirement or resignation. This can also be transferred from one company to the other if one switches jobs.

Return on Investment

EPF: 8.5% per annum

PPF: 8.7 % Per annum

Investment Tenure

EPF: Amount is paid at the time of retirement or resignation whichever is earlier. It can be transferred to one company to other in case of a job change

PPF: Amount can be withdrawn on maturity i.e. after 15 years. It can be extended for a period of 5 Years

Loan Option

EPF: Can make withdrawals for personal needs by disclosing suitable documents

PPF: Can avail loans up to 50% of balance of the 4th year from 6th year onwards

Tax Implication

EPF: Investment qualifies for deduction under Section 80C.Withdrawal of EPF amount is subject to tax if withdrawal within 5 years of employment with the same employer. If you have not worked for at least five years with the same employer but the EPF has been transferred to the new employer, it is not taxed

PPF: Investment qualifies U/s 80C. On maturity amount, there is no tax

Which is better?

EPF has an edge over PPF because of the following reasons:

Employer contribution

Employer contributes to the Employee Provident whereas in case of public provident fund no such contribution happens

Return on Investment

Rate of interest on EPF is almost on par with interest rate of PPF.


An individual having EPF can withdraw amount for personal needs any time providing necessary documents while an individual holding PPF cannot withdraw money till the completion of tenure


Though both the investment options has got their own pros and cons, from above we can observe that in EPF vs PPF, EPF has got edge over PPF in terms of  Employer Contribution and  Liquidity. For salaried people who have the option of contributing in EPF schemes, make sure you make the contribution to the fullest extent.  Since EPF is not available to self-employed and employees in un-organized sector, PPF is a good alternative.

  • Akashdeep Kasaodhan

    Suresh, u have mentioned PPF interest rate as 8.7% but in the discussion u said its lesser than EPF. Some confusion here!

    • Av Suresh

      We have corrected it now, Akashdeep. Thank you for stating the same.

      • Akashdeep Kasaodhan

        better now :)

  • gemini

    If for salaried employee the salary is stated as CTC(cost to company) and both employers contribution and administrative charges are actually taken from CTC, then does still EPF remains better. This is the case in most private IT/BPO companies. I also want to know whether this is actually illegal!

    • Av Suresh

      Salary in the case of EPF is taken as basic + da. The discussion here is more of how much returns EPF and PPF give, their taxation and liquidity rather than how much is being contributed.

  • Deepak Bhorkhade

    Can an individual open both accounts EPF as well as PPF?

    • Av Suresh

      Yes. EPF can be opened with employer and PPF with a nationalized bank or post office.

      • Deepak Bhorkhade


  • Kartik

    IF we withdraw EPF after 5 yrs in one organisation, it is not taxed. Does that mean even the money that was contributed in the 5th year will also be non taxable? Is it like the amount contributed to EPF in the 1st year would be non taxable and rest of teh amount from 2nd yr to 5th year would be taxable? Please confirm

    • Av Suresh

      Kartik, all the amount contributed till 5th year will be treated as non-taxable in such cases.

  • Rahul Mehta

    Mr. Suresh,

    Is there any EPF withdrawal online facilities provided by EPFO INDIA through their online portal?

    Due to some reason I am unable to withdrawal my EPF balance from my last resigned job since December 2011.

    Is anything happened to my EPF account? i.e. Block or inactive or freeze account by EPFO india due to non operational account.

    Your reply is more awaited.

    Thanking you.


    • Av Suresh

      Yes, EPFO provides online withdrawal facility from its portal. Your account becomes inactive if no action is taken for 3 years.

  • Deepak Masram

    Dear Suresh, EPF contribution above 12% stipulated limit of Basic+DA, will eligible for interest from the EPFO?

  • Deepak Masram

    Dear Suresh, I have left 10 years of service , enjoying debt free life with 5 dependents, my monthly home take salary is 95 K. & monthly expenses are 30-35 K. I have few questions 1.How to secure my retired life. Pl suggest financial plan to me 2. Is it advisable to open PPF account now? 3. Is it advisable to buy second house to claim income tax benefit & asset for family as well? 4. Is it advisable to take a fresh debt liabilities at this juncture? 5. My two months salary goes for TDS purposes, would you suggest any IT plan to save at least one months salary?

    • Av Suresh

      1) Financial plan can only be done after assessing the overall financial situation. InvestmentYogi provides free financial planning tool which you can use for creating your plan. 2) Yes, opening a PPF account is always a good idea. It provides good tax free returns. 3) Buying a house cannot get you tax benefit. Only home loan gives you the benefit. If you want to build an asset, house can be a good choice. 4) Depends on other aspects such as current liabilities, networth, etc 5) You can read our articles on tax saving for this purpose – http://www.investmentyogi.com/taxes/tax-saving-as-per-income-tax-slabs.aspx

  • Vivek

    Hi Av Suresh,
    I am Individual IT assess.
    I have PPF a/c in my individual name and invest to the maximum Limit and Claim the same under sec.80c. Now I want to open a PPF a/c in my recently born daughter’s name. To claim benefits I can add her mothers ( my wife) name as guardian. Can she claim exemption under sec.80c. She is not working though but some time she works as freelancer.

    July 22, 2014

  • yamuna

    pls tell me about service tax where it will applicable & how to caculate

  • Divyaa

    If I’ve worked with a company for 4 yrs, 10 months and another company for 2 month, totaling to 5 yrs. If I then withdraw completely from EPF a/c, will it still be taxable?

  • Divyaa

    If I’ve worked with a company for 4 yrs, 10 months and another company for 2 month, totaling to 5 yrs. If I then withdraw completely from EPF a/c, will it still be taxable?

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