EPF or PPF: Provident Fund As Future Investment Instrument

The prime motive of the government of any country is to provide the financial stability to all its citizens, especially in their elderly age when they are incapable of earning themselves either through business or by acquiring any kind of employment. Thus, to achieve the same, the Government of India initiated the system of Provident Fund (PF) which comprises of Employee Provident Fund (EPF) and People Provident Fund (PPF). These are the taxable deductions that get subtracted from the taxable income. When a taxpayer calculates his/her total tax liability for a particular year, he/she is entitled to deduct the amount contributed towards provident fund in that very year. It is a great instrument to save for retirement as well as save tax.

Before investing in EPF and PPF, understand the difference between both. Find out which instrument would be more apt for you to invest in for a secured future and are you eligible to invest in EPF or not.

Employees’ Provident Fund (EPF)

Employees’ Provident Fund investing instrument is available solely to the employees who are employed in the companies on the monthly salary basis. The employer organization itself on monthly basis in order to secure the future of their employees and provide them with some kind of financial aid to rely upon after their retirement invests a part of their income in the EPF. The employer as well contributes a portion of the EPF towards the employees EPF.

Public Provident Fund (PPF)

For those who do not belong to the employment category (self-employed, unemployed, etc.) PPF is the one instrument that can serve as the long-term investment. Though a self-employed cannot invest in an EPF account, yet the salaried employees can maintain both EPF as well as PPF accounts. They can invest in public provident fund as well as EPF if they desire to do so.

Which Instrument To Invest In?

There are certain parameters on which both the instruments can be compared with each other. However, one cannot point out one particular scheme that is more beneficial to invest in as both branch out from PF Scheme.

Depending upon an individual’s employment status, they have their own significance to secure the future of an individual.

At one end where Employee Provident Fund (EPF) is an instrument that is compulsory for a company having more than 20 members working under it to invest in on behalf of their employees. One simply is not given an option whether to invest in it or not as a salaried person.

As per latest updates that came in for Assessment Year 2013-2014

• An assessee can invest within the amount of INR 500 to 70,000 per annum as required by him to save for the future.
• As per financial year 2012-2013 the rate of interest for EPF is 8.5% while the rate of interest for PPF is 8.7%
• The investment amount as well as the rate of interest on EPF as well as PPF keeps varying though the tenure for the maintenance of the PPF account is 15 years fixed.

Public Provident Fund (PPF) is something that MUST be used by the business class or other individuals in order to safeguard their future uncertainties regarding the finance.