Nov 272015

EPF, GPF and PPF: The Differences Explained!

Anybody who is doing a job –in any government or non-government organization –needs to understand the basic differences between the provident and pension funds. EPF, GPF and PPF are most common funds. First you should know what these abbreviations stand for. EPF is an acronym for Employees Provident Fund, GPF is General Pension Fund and PPF is Public Provident Fund. EPF is given to the employees working in the private sector.


EPF includes 12% employer’s share, 12% employee’s share plus DA. GPF is given to the government employees. And in PPF the employees can save around RS 60,000 per year in a deposit account in a post office.

We now compare and contrast EPF and PPF. GPF is decided by the government and it largely depends on the type and rank of the job. In order to understand EPF and PPF better, read along.

Basic differences between EPF and PPF

Getting started with the accounts:

EPF is also known as PF, which is simple provident fund. This program is to facilitate the employees after their retirement. Every month 12% of salary is deducted from the basic salary of the employee is added in as EPF. An important thing to know about the percentage of this contributed amount is this amount is finalized by the government.  The employer also shares 12% in the fund. Now, if the employee wants to add more share in the share, he can increase this amount. But in this case the employer is not bound to pay more than 12%.

PPF is a government fund scheme. If an employee wishes to avail this scheme, he can readily do so. The best part about this scheme is you do not need to have a job in order to open an account. If you are unemployed, or working as a freelancer, or you have a contract based job, you can apply in the scheme in any case. To open an account you will need to the specific post office or the head post office. The range of money you can deposit in this account is RS 500 to RS 70,000 per year.

Investment returns:

The return you get on your investment is 8.5% per year in EPF. The return you get on your investment is 8% per year in PPF.

Time period to get the money back:

The time frame to get the money back is different in both cases.

In EPF you cannot get the money before your retirement. In case you have left the job, you get your money back. But if you want to continue with EPF, you can transfer this money to your new company. Legal heir get the amount if the employee dies.

In PPF you get the accumulated money after 15 years. If you wish to withdraw all amount, you can do that after 15 years. But if you wish you extend the time period, you can take it up to 5 more years. This way you earn the interest rate. This can be a good strategy to save money if you save taxes.

Tax Impact:

Under Section 80c of law, you need to pay tax if your amount is under 1 lakh. In three cases you do not need to pay tax. Firstly, if you have completed the tenure of 5 years job, secondly if you have changed the job and transferred the funds to the new employer and thirdly if the funds are withdrawn on the basis of bad health. You will need to pay tax if you have not completed five years of your job.

In case of PPF, under Section 80c of law, you need to pay tax if your amount is under 1 lakh. When your funds mature, you do not need to pay anything.

In case of emergency:

If you are dealing with EPF and you need your money, taking loan on EPF can sort out matters for you. In another case you can withdraw the money prematurely. In case of premature withdrawal, you would need to provide a valid reason such as wedding of your daughter. Remember, you cannot withdraw money to buy a new home or son’s wedding. You can always discuss such matters with your employer before taking any step.

In case of PPF too you can take loan on your amount. But you need to follow certain conditions. You can only apply for loan between third to sixth years of account opening date. Only 25% PPF account amount would be given as a loan. Premature withdrawal is also possible in first six years of account opening. It is always wise to discuss before you withdraw. There are certain rules to be followed. Not all the money can be withdrawn in one go. So, understand the rules first then take any step. You can always contact the management of the concerned organization.

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