EPF Vs. PPF: Functions and differences

There are many differences between PPF (Public Provident Fund) and EPF (Employees’ Provident Fund) as investing instruments. Generally speaking, EPF is automatically collected from the salaries of the salaried class of people, while the option to participate in a PPF scheme lies with the investors. Both of these investment strategies let investors avoid paying taxes. Both PPF and EPF investments are eligible for a variety of income tax incentives under Section 80 C of the Income Tax Act of 1961.

epf vs ppf vector

Definition of EPF

EPF is one of the systems under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, along with Employees’ Pension Scheme and Employees’ Deposit Linked Insurance Scheme. EPFO manages and governs the fund.

Every company with 20+ employees must register with the EPFO. Under specific conditions, organisations with fewer than 20 employees can register with EPFO.

The system encourages employee savings by deducting a portion of their base income (and dearness allowance, if applicable) each month. Employers also contribute. At retirement or resignation, the employee receives the corpus sum plus interest.

In general, both employer and employee contribute 12% of the salary to the account, with the employee’s contribution going entirely to the EPF and the employer’s part going to the Employee’s Pension Scheme. The government and central trustees set EPF’s annual interest rate.

Definition of PPF

The PPF is a public savings scheme. The National Savings Institute, under the Ministry of Finance, introduces this scheme in 1968. The system is controlled and governed by the Public Provident Fund Scheme, 2019, which was previously regulated by the Government Savings Bank Act, 1873.

PPF is a safe, long-term, tax-free, interest-bearing savings and investment vehicle that helps people save for retirement by investing over time. Government sets interest rates annually.

Any resident can invest in the PPF, except the HUF. A parent or guardian can open an account for a minor or unsound mind. Joint PPF accounts aren’t allowed. Any post office or bank branch can open the account.

After 15 years, the cumulative cash with interest can be withdrawn or the term can be extended for 5 years.

The annual deposit limit is $500 to $150,000. The total deposit made in the individual’s personal account and accounts opened on behalf of others cannot exceed 1.5 lakhs. Maximum 12 deposits per year.

After 5 years after account opening, partial withdrawals are allowed. Partial withdrawal implies the lowest of 50% of the PPF account balance at the end of the 4th year before the year of withdrawal or the previous year.

Key Differences

The following distinguishes EPF from PPF:

  • EPF is a system run by Employee Provident Fund Organization (EPFO) in which all employees of a qualifying organisation earning less than $15,000 must save a specific proportion of their pay. PPF stands for Public Provident Fund, a public investment plan where citizens over 18 can invest their money in bank branches or post offices.
  • Act of 1952 regulates EPF. The Public Provident Fund Scheme, 2019, governs PPF.
  • EPF covers salaried employees of EPF-registered businesses. Any resident of India, including salaried people, can open a PPF account, although NRIs and Hindu Undivided Families cannot (HUF).
  • EPF is mandatory for all EPFO-registered employees earning less than 15000, and those earning more can choose to contribute. PPF is voluntary, so individuals can save and invest at will.
  • Both employee and employer contribute to EPF, while the individual, or parent in the case of a child, contributes to PPF.
  • In EPF, employee and employer each contribute 12% of Basic Salary + Dearness Allowance (DA). In PPF, you can invest between 500 and 1,50,000 each year.
  • The period of EPF depends on how long the individual works for the organisation; if he/she resigns, the fund is either transferred to the new organisation if the job is switched, or the accumulated balance is withdrawn and the account is closed. In addition, the sum is deposited to the retiree’s bank account. PPF has a fixed period of 15 years, after which the user can extend it for 5 years or liquidate the account.
  • After 5 years, one can borrow against EPF. Under certain conditions, you can borrow up to 25% of your PPF balance.


Provident Fund is a retirement system that saves a percentage of your hard-earned money for emergencies, loans, or post-retirement.

These two are popular because they offer a higher interest rate than banks and are tax-free. The lock-in period means you must invest the money and use it afterwards.