PPF vs EPF: EPF or Workers’ Provident Fund is a government-backed retirement profit scheme designed for salaried people solely whereas PPF or Public Provident Fund is designed to supply previous age revenue safety to a PPF account holder. Each give revenue tax exemption on as much as ₹1.5 lakh funding in a single monetary 12 months beneath Part 80C of the revenue tax act however EPF funding is obligatory for a salaried particular person whereas PPF is an elective funding instrument obtainable for all incomes people. Nevertheless, is it sensible for an incomes particular person to spend money on PPF account or one can produce other choice to get extra return and save revenue tax as nicely?
PPF vs EPF rate of interest
Advising salaried people to think about Voluntary Provident Fund (VPF) as a substitute of PPF, if the funding is for retirement fund; SEBI registered tax and funding professional Jitendra Solanki mentioned, “If a salaried particular person is searching for tax saving retirement-oriented funding instrument, then he has VPF, which is significantly better than PPF. In VPG, one will get identical 8.50 per cent EPF rate of interest every year whereas PPF rate of interest is 7.1 per cent solely. However, PPF account has extra liquidity and therefore VPF will be chosen forward of PPF solely when the funding goals to create retirement fund.”
Solanki went on so as to add that after rationalization of Provident Fund, EPF rate of interest earned on funding past ₹2.5 lakh every year is taxable if each worker and employer contribute in EPF account. So, one ought to select VPF protecting this rationalization in thoughts.
PPF vs EPF vs VPF
On how to decide on VPF and lift one’s EPF funding; Manikaran Singhal, Founder at goodmoneying.com mentioned, “As per the Workers’ Provident Fund Organisation or EPFO guidelines, a salaried particular person can contribute greater than 12 per cent of its primary wage in its EPF account by asking the HR of its workplace for that. The worker can do that both on the time of becoming a member of the workplace or originally of the brand new monetary 12 months.” He mentioned that an employer simply agrees for VPG as they want to not increase their month-to-month contribution when an worker opts for VPF. An employer want to not contribute greater than 12 per cent of the fundamental wage of an worker even when the worker has chosen VPF.
Manikaran Singhal mentioned that an worker has a luxurious to decide on both of EPF and PPF and if the worker ought to attempt spend money on EPF by way of VPF route if she or he is searching for retirement-oriented funding instrument. It helps get 1.40 per cent extra return with out growing the chance issue as each PPF and EPF are 100 per cent risk-free funding choices. He mentioned that if the funding goals at saving revenue tax and get extra return at any value then VPF is healthier for a salaried particular person however for many who have a look at liquidity throughout monetary emergency, then PPF is healthier because it permits withdrawal earlier than maturity beneath sure circumstances, which isn’t as simple within the case of EPF withdrawal.
Supply: Live Mint