Planning for a secure future? EPF and PPF are two of India’s most trusted savings schemes, but which one is right for you?
Why This Comparison Matters
- Both EPF (Employee Provident Fund) and PPF (Public Provident Fund) are government-backed and offer risk-free returns.
- Both provide tax benefits, making them ideal for long-term savings and retirement planning.
- However, they differ in eligibility, contribution limits, withdrawal rules, and tax treatment.
Key Question:
Should you invest in EPF, PPF, or both?
What is EPF (Employee Provident Fund)?
A mandatory retirement savings scheme for salaried employees in companies registered under EPFO.
Who is Eligible?
- Employees working in an organization with 20+ employees (registered under EPFO).
- Self-employed individuals or business owners cannot open an EPF account.
Contributions:
- Employee contributes 12% of Basic Salary + Dearness Allowance (DA).
- Employer contributes 12%, but only 3.67% goes to EPF, and 8.33% goes to EPS (Employee Pension Scheme).
Interest Rate (2025):
- 8.15% (subject to periodic revision by EPFO).
Lock-in Period:
- Cannot withdraw fully until retirement (age 58).
- Partial withdrawals allowed for home purchase, education, marriage, and medical emergencies.
Tax Benefits:
- Employee contribution eligible for Section 80C deduction (up to ₹1.5 lakh per year).
- Interest earned is tax-free if withdrawn after 5 years.
What is PPF (Public Provident Fund)?
A government-backed voluntary savings scheme for all individuals to encourage long-term investments.
Who is Eligible?
- Anyone can open a PPF account, including salaried employees, self-employed individuals, students, and homemakers.
- Minors can also have a PPF account (opened by parents/guardians).
Contributions:
- Minimum ₹500 per year, maximum ₹1.5 lakh per year.
- No employer contribution.
Interest Rate (2025):
- 7.1% (government revises quarterly).
Lock-in Period:
- 15 years (partial withdrawals allowed from the 7th year).
Tax Benefits:
- Investments qualify for Section 80C deduction (up to ₹1.5 lakh per year).
- Interest earned and maturity amount are completely tax-free (EEE – Exempt, Exempt, Exempt category).
Key Differences Between EPF and PPF
| Feature | EPF (Employee Provident Fund) | PPF (Public Provident Fund) |
|---|---|---|
| Eligibility | Only salaried employees | Any Indian citizen (salaried, self-employed, etc.) |
| Managing Authority | EPFO (Employees’ Provident Fund Organisation) | Government of India |
| Employer Contribution | Yes (12% of Basic Salary + DA) | No employer contribution |
| Employee Contribution | 12% of Basic Salary + DA | Voluntary (₹500 to ₹1.5 lakh per year) |
| Interest Rate (2025) | ~8.15% | ~7.1% (varies quarterly) |
| Lock-in Period | Till retirement (age 58) | 15 years (partial withdrawals from 7th year) |
| Withdrawal Flexibility | Allowed under specific conditions | Allowed after 15 years, partial after 7 years |
| Tax Benefits | Section 80C deduction; tax-free if withdrawn after 5 years | Fully tax-free (EEE category) |
| Ideal for | Salaried employees with long-term job stability | Anyone seeking a risk-free, tax-free savings option |
Which One Should You Choose?
Choose EPF if:
- You are a salaried employee and your employer is registered with EPFO.
- You want higher returns with mandatory employer contributions.
- You are comfortable with long-term savings and limited withdrawal flexibility.
Choose PPF if:
- You are self-employed, a freelancer, or a business owner.
- You want a safe, tax-free investment with guaranteed returns.
- You can commit to a 15-year lock-in period.
Can You Invest in Both EPF & PPF?
Yes! Many salaried employees invest in both EPF & PPF to maximize savings.
Why Combine Both?
- EPF offers higher returns + employer contribution, making it great for retirement savings.
- PPF is fully tax-free, making it an excellent secondary investment.
- Together, they ensure financial security with tax-saving benefits.
Recommended Strategy:
- Contribute to EPF as per salary.
- Invest in PPF for additional risk-free savings & tax benefits.
Common Questions About EPF and PPF
Can NRIs invest in PPF?
No, NRIs cannot open new PPF accounts (but existing ones can be maintained).
Can I withdraw my EPF before retirement?
Yes, under certain conditions like medical emergencies, home purchase, or unemployment.
Is PPF better than FD (Fixed Deposit)?
Yes, because PPF is tax-free, while FD interest is taxable.
What happens if I don’t contribute to PPF for a year?
The account becomes inactive, and a penalty applies to reactivate it.
Can I transfer my EPF if I change jobs?
Yes, EPF is linked to UAN (Universal Account Number), so it can be transferred easily.