Jagoinvestor

April 10, 2008

Everything you need to know about PPF and EPF

Everyone wants to spend an easy life without any stress specially related to money. And this is why people are becoming more and more conscious about their savings and investment.

It is good for now that you are working and earning good enough to cover your expenses, but what after your retirement? Have you thought how will you manage your expenses after your retirement?

EPF and PPF

Let me tell you, there are options like EPF and PPF in which you can invest and save your money which you can utilize after your retirement.

Let’s see each of EPF and PPF in detail. Both are provident fund benefits for retirement.

Employee Provident Fund (EPF)

The Employee Provident Fund is a retirement benefits scheme that is available to salaried employees. Under this scheme, a stipulated amount (currently 12%) is deducted from the employee’s salary and contributed towards the fund.

This amount is decided by the government. The employer also contributes an equal amount to the fund. However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let’s say the employee decides 15% must be deducted towards the EPF.

In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%.

There are some specific features of EPF which are beneficial for the account holder. These features are as follows –

  • Return on Investment: 8.65%
  • If you urgently need the money, you can take a loan on your PF. You can also make a premature withdrawal on the condition that you are withdrawing the money for your daughter’s wedding (not son or not even yours) or you are buying a home.
  • tax benefit under Sec 80C.
  • The amount if withdrawn after completing 5 years in job will not be taxable.

Public Provident Fund (PPF)

The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. For that you need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis.

You can also open this account if you are not earning. Any individual can open a PPF account in any nationalized bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.

You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 1997-98, the first loan can be taken during the financial year 1999-2000 (the financial year is from April 1 to March 31).

The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. In this case, it will be March 31, 1998.

You can make withdrawals during any one year from the sixth year. You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

For example:

If the account was opened in 1993-94 and the first withdrawal was made during 1999-2000, the amount you can withdraw is limited to 50% of the balance as on March 31, 1996, or March 31, 1999, whichever is lower.

If the account extended beyond 15 years, partial withdrawal — up to 60% of the balance you have at the end of the 15 year period — is allowed.

Watch this video to learn more clearly about PPF and EPF:

Features of PPF:

  • The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.
  • Return on investment : 8%
  • tax benefit under Sec 80C , no tax on the maturity and no tax on interest earned.
  • If you’re involved in a legal dispute, a court cannot attach or question the money in your PPF account.

Who should invest in PPF?

Usually, everyone can invest in PPF but it’s mainly for those people who are very conservative and cant take risks to a great extent.

Anyone who wants to invest in the long term in some secure saving instrument must invest in PPF. To achieve long term goals there are many option like:

  • Mutual Funds (Equity)
  • Shares (Equity )
  • PPF (Debt)
  • Fixed Deposit (Debt)
  •  NSC (Debt)
  •  Others

Out of these, all under the Debt category are safe. PPF is the most recommended if the investment horizon is very long like 15+ years. Because of compounding your money will grow into a big amount.

I would be happy to read your comments or disagreement on any topic. Please leave your queries or doubts in our comment’s section.

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Avinash Singh
Avinash Singh
2 years ago

I recently had the good fortune of reading your article. It was well-written and contained sound, practical advice.

debora
3 years ago

Great Article. It’s really informative and innovative. keep posting with the latest updates. Thanks for sharing.

Thoudam Danbir singh
Thoudam Danbir singh
7 years ago

Dear sir,In an Unstable suitation i left my organisation on february 2009 and i dint any get second chance to go there for my clearence,but still i tried to widraw my PF through online but uanable to proceed,please help me,,,,My PF number was KN/35119/1111

VIJAY
VIJAY
7 years ago

Sir
Can I have Rs 2 Lakhs pa in EPF and 1.5 Lakh pa in EPF?

Vijay
Vijay
Reply to  Jagoinvestor
7 years ago

Sorry for the typogrmistake. My question is whether
Can I have both EPF and PPF at the same time? Can I have 1.5 Lakh pa in PPF.

SPGupta
SPGupta
7 years ago

Can I nominate both my sons as nominees in My PPF A/C with SBI.

Sukesh
Sukesh
8 years ago

Hello Sir,
It was great reading through all of your articles, need to clarify few thing about ppf, please correct if I am wrong,

PPF A/C Open date: 28.08.10 (FY 2010-11)
Loan by date: 01.04.14 (25% of amount on 01.04.13)
Withdraw by date: 01.04.17 (50% of amount on 31.03.15)
Where 31.03.15 considered balance prior to addition of interest and 01.04.13 after addition of the interest.
PPF Maturity Date: 01.04.26
Thanks in advance.

Sukesh
Sukesh
Reply to  Jagoinvestor
8 years ago

Need to clarify whether the above understanding is correct for the ppf account, for example whether the account opened in FY 2010-11 will have withdrawal facility commence from FY 2017-18 and other details. If correction requires, please do the needful.

Manju
Manju
8 years ago

Hi,

I wish to withdraw my EPF now in Feb 2016 , i have the below queries.
Q1 : Does i get the EPF interest till Feb 2016 or only till the last Financial Year – March 2015
Q2 : My job has been terminated which is beyond the control of the member, hence TDS/tax should not be deducted as i have served for only 4.7 years and terminated by employer. I have joined a new company almost 2 years back and had earlier applied for EPF through employer, but the claim settlement has rejected and did not get the reason for rejection and also did not get the rejection letter dispatched.
Q3 : Whom to contact for reason for rejection.
Q4 : Does the employer accept if we mention Reason for Leaving the service as – Terminated from Employer.
Q5 : To withdraw EPF and avoid TDS/tax for EPF amount what all forms to submit – Is it Form 19 and 15G is enough or any other forms to submit, as the EPF amount is above 2.5 Lakhs.
Q6 : As i don’t have Adhaar card and UAN for the earlier employer, can i submit the forms in regional EPFO office without Employer signature or can be submitted through employer only.
I have UAN for the current employer only.
Q7 : How much time will it take to get the EPF amount to my bank account now.

Thanks,
Manju

hitesh kumar
hitesh kumar
8 years ago

Hello sir , I am 30 years old . i am a salaried person . I wana save my rupees only only through VPF account .i wana deposit 10000₹ every month . is this good for me ? I don’t take any risk .

nipuldas
nipuldas
8 years ago

I worked in a company from March 2014 to September 2014 (7 months) and join new company from October 2014 to July 2015. Now I am self employed. My question is can I withdraw the pf amount only from 2nd company? Pls. advise me. Sir, my 1st company is closed and I dont know my epf account no. Therefore I want to withdraw my 2nd company’s epf amount. Can I do it?

DIVAKAR
DIVAKAR
8 years ago

WIITHDRAWAL OF VPF BEFORE 5 YEARS IS TAXABLE.
IF I CONTRIBUTED 5000 RUPEES FOR 12 MONTHS IN VPF AND AFTER 12 MONTHS (1-YEAR) I WANT TO STOP THIS VPF AND BREAK IT.
CURRENTLY INTEREST ON VPF IS NEAR TO 8.75%. THEREFORE FOR ABOVE SAVINGS THE INTEREST WOULD BE NEAR TO 5100 RUPEES. THE TOTAL AFTER 12 MONTHS WOULD BE NEAR TO 65100 RUPEES.

MY QUESTION IS IF I BREAK THIS VPF AFTER 12 MONTHS..WHAT AMOUT WILL I GET IN RETURN..AS I SAID IN BEGINING THAT WIITHDRAWAL OF VPF BEFORE 5 YEARS IS TAXABLE.

Divakar
Divakar
8 years ago

hello..Sir
I want to know about the maximum about that an employee can deduct from his salary.
OR how much % of of maximum amount can be deducted in EPF as per rules and guidelines made.
and also is this amount considered from Basic Pay or from full gross payment monthly??

Prince
Prince
9 years ago

the interest rate is 8.7 % , not 8%…please do correct it.

Kinjal Dodia
Kinjal Dodia
9 years ago

Dear Sir,

Can EPF balance accrued in a company can be transferred to PPF account

AMOL
AMOL
9 years ago

Many Thanks Manish for your valuable feedback…..

Regards,
Amol

kavaljit
kavaljit
9 years ago

hi, i have a question— i have already resigned from my job and applied for my EPF to encash. however i want to open a PPF in the meanwhile. can i open? will my opening of PPF will have any affect on my EPF encashment with a new system of UAN in picture now?

kavaljit
kavaljit
Reply to  Jagoinvestor
9 years ago

thank you manish for clearing my doubt. god bless

Aman
Aman
9 years ago

May start from Oct-2014

Aman
Aman
9 years ago

Is Tax is deducted on EPF. I heard that Tax is deducted on amount of EPF a/c

AMOL
AMOL
9 years ago

Dear Manish,

Thanks to you to increase my financial literacy.

I am in 8th year of my PPF account having balance of 3 Lacs at the end of 7th year of my PPF account.

To take advantage of 80C can I withdraw 50% (i.e. 1.5 Lacs) in 2nd week of March-15 & again deposit the same amount in 3rd week of March-15.

1) Can I repeat the same process (of withdrawal & again deposit) in next consecutive years also to avoid other investments for income tax benefit..??
2) Do I have any interest loss due to this?
3) Can I make one withdrawal in each financial year till I complete the tenure of 15 years…..or there are any restrictions on withdrawal…

Pl. guide & share your view, which matters a lot for me.

Regards,
Amol

venkatasiva
venkatasiva
9 years ago

Hi,
If the person who is investing in ppf was died without complete 15 years what will happen to that invested money??
Plz clear my doubt

Baaz
Baaz
9 years ago

Dear Mr Manish,
I am a seeking your clarification regarding PPF:-
I opened a PPF account with RS 1 lakh on 04 Jun 2014 with SBI (my savings account is linked).
As I understand my account shall mature on 01 April 2030. Is this correct?
Now If I were to invest Rs 1.5 lakh before 05th of April of every year from 2015 to 2029, what would the effect on :-
1. original maturity date of 01 Apr 2030?
2. I would have invested ((1 lakh + (1.5*15)) = 23,50,000/- (1.5 lakh from 2015 to 2029) what would be the maturity amount assuming a fixed rate of interest of 8% (hypothetical)?
3 Would the maturity amount be tax free?
4. Will I derive tax benifit of Rs 1 lakh in FY2014-15 and Rs 1.5 lakh every later FY till 2029-30 (assuming no changes in taxes rates, again hypothetical and certainly unwelcome)?
Kindly help me in this understanding.
Regards
Baaz

baaz
baaz
Reply to  Jagoinvestor
9 years ago

Thanks,
Baaz

baaz
baaz
Reply to  Jagoinvestor
9 years ago

Dear Mr Manish,

I also found this excel sheet that is closer to solving the problem that I had posted above.

Please allow me to share with your readers who are sure to benefit.

Thanks

Here is the link :-

https://www.scribd.com/doc/254779259/Excel-PPF-Calculator

regards
Baaz