The Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF) are two commonly known options for retirement savings. EPF is primarily for salaried employees, while PPF is available to everyone. In this article, we will compare EPF and PPF to help you understand which option best suits your retirement.
What are EPF and PPF?
Established under the Employees’ Provident Funds and Miscellaneous Provisions Act of 1952, EPF is a retirement scheme for salaried individuals. It is governed and managed by the Employees’ Provident Fund Organisation (EPFO).
PPF is a government-backed small savings scheme open to all resident individuals, regardless of their employment status. Accounts can be opened at banks and post offices.
EPF vs. PPF: Who can invest?
EPF is available to salaried employees at companies with 20 or more employees. If your basic salary is ₹15,000 or less, EPF is mandatory. Once you become a member of the EPFO, you cannot opt out, even if your salary increases later in your current job or after changing jobs. If your salary exceeds ₹15,000 when you start working, contributing to the EPF is voluntary, provided you are not already a member. For such cases, if both the employer and employee agree, the employee can voluntarily opt for the EPF scheme.
PPF is open to all resident Indians. A guardian can open a PPF account on behalf of a minor.
EPF vs PPF: How much to invest
Both employer and employee contribute 12% of the basic salary (plus dearness allowance if any) to the EPF monthly. The employer’s share is split: 8.33% goes to the pension fund (EPS) and 3.67% to the provident fund. Employers also pay 0.50% for Employee’s Deposit Linked Insurance Scheme (EDLI) insurance and 0.50% in administrative charges.
For salaries exceeding ₹15,000, the employer’s pension contribution is capped at 8.33% of ₹15,000, with any surplus directed to the provident fund.
For PPF, the minimum annual investment is ₹500, and the maximum is ₹1.5 lakh in a year. If you fail to invest the minimum amount, the account will become inactive.
EPF and PPF: Interest rates and returns
The EPF interest rate for the financial year 2024-25 is 8.25% per annum. Interest on EPF contributions is calculated monthly but is deposited annually. The EPF interest rate is reviewed every year.
The PPF interest rate for the October-December quarter of 2025 is 7.1%. Interest is credited annually based on the lowest balance between the fifth and the last day of each month. PPF interest rate is reviewed quarterly.
EPF and PPF: Tax benefits
Under the old tax regime, your EPF contributions are eligible for a tax deduction of up to ₹1.5 lakh under Section 80C. However, no such deduction is available under the new tax regime.
For EPF, employer contributions are tax-exempt in both regimes. Note that if the combined employer contribution to your EPF, NPS, and superannuation funds exceeds ₹7.5 lakh annually, the excess amount becomes taxable.
Interest is tax-free up to an annual employee contribution of ₹2.5 lakh. Interest earned on any amount above this threshold is taxable.
EPF withdrawal is tax-free after five years of continuous service.
You can claim a tax deduction of up to ₹1.5 lakh under Section 80C in the old tax regime. No deduction under the new tax regime. The interest earned on a PPF account is fully tax-exempt. Additionally, the entire maturity amount received after 15 years is also completely tax-exempt.
EPF and PPF: Withdrawal rules
Unemployment: If you lose your job, you can withdraw 75% of your EPF corpus, which includes employer contributions and interest, after one month of unemployment. The remaining 25% can be withdrawn after 12 months of continuous unemployment to ensure a safety net remains for your retirement.
Retirement: Upon reaching the age of 58, you are eligible for a 100% withdrawal of your EPF and EPS (Pension) funds.
Pre-retirement (Age 54): Once you reach 54 years of age, you can withdraw up to 90% of your total EPF corpus, provided you are within one year of your official retirement date.
Partial withdrawals: You can access funds for specific life events—such as medical emergencies, home purchases, education, or marriage—after completing just 12 months of service.
Complete withdrawal from PPF account is permitted after 15 years. Partial withdrawals are allowed from the seventh year, and premature closure is possible only for specific reasons.
EPF and PPF: Key differences at a glance
| Category | EPF | PPF |
| Returns & Risk | 8.25% for FY2024-25 | 7.1% for Oct-Dec quarter, 2025 |
| Who Can Join | Salaried employees | All residents (except NRIs) |
| Lock-in Period | Until retirement/unemployment | 15 years |
| Tax Benefits | -Up to ₹1.5 lakh deduction under Section 80C for employee contributions under old tax regime
-Interest is generally tax-free. -tax-free withdrawal after five years -Maturity amount is tax-free after five years |
– Up to ₹1.5 lakh deduction under Section 80C.
– Interest on your PPF balance is fully tax-exempt. – Partial withdrawals is tax-exempt. – Lump sum received at maturity is tax-free. |
| Withdrawals | Partial withdrawal available after 12 months, | Partial withdrawal from 7th year |
| Employer Contribution | Yes (typically 12% of the basic salary) | None |
| Flexibility | Fixed contribution | ₹500–₹1.5 lakh yearly |
EPF and PPF: Which one should you choose?
EPF is best suited for salaried individuals seeking mandatory retirement savings with employer participation. PPF, on the other hand, offers greater flexibility and is ideal for those who want control over their investments and are not salaried. Both are safe and tax-efficient, but your choice should be guided by employment status, financial goals, and investment horizon.
For personalised retirement planning, consider consulting a Qualified Financial Advisor to align your savings strategy with your broader financial objectives.
