Differences Between EPF VPF And PPF

Employee Provident Fund (EPF)

An Employee Provident Fund is one of the more popular long term savings schemes usually aimed at retirement planning. It was initiated by the overlooking eye of the Government Of India and being regulated by the Ministry of Labour through an organization called Employee Provident Fund Organization. The fund comprises monetary contributions from both employee and the employer every month. The scheme promotes planning for post-retirement life of the employee while they are working so that they have funds to sustain themselves once they stop working.

Voluntary Provident Fund (VPF)

The Voluntary Provident Fund acts as a add on feature of an Employee Provident Fund (EPF) wherein the employee contributing 12% of his/her salary in EPF can add on their contribution with no upper limit on these contributions , the employee can add more funds to enjoy the same interest and other benefits of a working EPF account however it should be noted that the employer’s contribution remains the same throughout.

Public Provident Fund (PPF)

The Public Provident Fund is one of the most popular and common savings funds in India which is open to all its citizens . It's one of the more appealing saving schemes for the long term savings because it is a fund which is backed by the government and thus promising stable and safe returns wherein the interest rate is decided by the government at the end of every financial quarter. Moreover the fund offers a number of additional benefits as well.

Which One To Choose: EPF VPF And PPF?

The key differences between an EPF , VPF and PPF are :

1. Eligibility 

An EPF fund is available for investment only to the employees of the registered Employee Provident Fund organisation similar to this A VPF fund is also available to the same qualifying customers whereas a PPF is available to any and all Indian Residents.

2. Employee And Employer Contribution

In An EPF fund both employee and employer contribute 12% of the employee’s salary + Da in the  EPF fund while in VPF fund an employee can add additional funds to his EPF contributions while the employer’s contribution remains the same as required for the EPF account whereas in PPF account the customer can invest as much as he wants and he gets interest paid by the government on 31st march every year.

3. Lock In Period 

In both EPF and VPF funds one is bound by the restrictions of the fund till retirement or till the time they stop working completely whereas in PPF the lock-in period lasts up to 15 years to encourage long term disciplined savings.

4. Tax Benefits 

All the investments qualify for tax deductions under section 80 C of the Indian tax Act; moreover all the returns on these funds are exempted from tax as well.

5. Interest Paid 

Funds in an EPF and a VPF account get an interest of 8.50% whereas funds in PPF account get varied interest averaging at 7.10%.

6. Premature Withdrawals And Loan Facility 

An EPF fund and a VPF fund don’t allow for a loan facility though one is allowed to make a premature withdrawal of the accumulated funds whereas in PPF funds one is allowed to take a loan after completion of 3 years of investing.

Conclusion

Which one of these policies is better for long term savings can be best answered by looking at the comparative analysis of the factors that would determine the investor’s choice. It is totally depended on the investor which one of these policies is more suitable for them as EPF and VPF are restricted to only working employees of registered companies whereas PPF is open to all  so a person invested in EPF can make the best choice for the investment of his additional savings whether he wants to continue to enjoy the same benefits of EPF which could be done by investing through VPF while one could also go for the Benefits of an PPF account such as loan facility.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.