EPF vs PPF vs VPF vs GPF – What Are The Key Differences in 2023?
When it comes to long-term savings and investment options in India, there are several popular schemes to choose from, including EPF, PPF, VPF, and GPF. Each scheme has its own features, advantages, and disadvantages, making it important to understand the differences between them and choose the one that best suits your investment goals.
In this article, we will compare and contrast EPF Vs PPF Vs VPF Vs GPF based on their eligibility criteria, interest rates, tax benefits, withdrawal rules, and other key features.
A Provident Fund, or PF, is a safe and secure investment option that most Indians trust, especially middle-class employees. It provides excellent interest rates, and at the same time, it is very easy and convenient to invest.
Consider reading: Top 10 Best Investment Options in India
Page Contents
EPF vs PPF vs VPF vs GPF – What Are The Key Differences?
| Factors | EPF | VPF | GPF | PPF |
|---|---|---|---|---|
| Kind of PF | Employee provident fund | Voluntary provident fund An extension of EPF. | General provident fund | Public provident fund |
| Account managed by | EPFO(Employees’ provident fund organization ) | EPFO(Employees’ provident fund organization ) | Department of Pension and Pensioner’s Welfare | Banks/Post office on behalf of Central Government |
| Eligibility | Any organization employing a minimum of 20 workers is liable to give EPF benefits to the workers. | salaried individuals who receive their monthly payments through a specific salary account and contribute to EPF. | Only Govt employees who are residents of India and only if they have joined before 1st Jan 1004 can invest in GPF | Any Indian age 18 or more can invest in PPF |
| Contribution Limits | Restricts to 12 % of basic salary | Allows more than 12 % maximum contribution is up to 100% of his Basic Salary | An employee contributes 6 % of the salary Government contributes 6% of the salary | Min of 500 and up to 1.5 lakh can be deposited in a financial year |
| Tax Benefit | Falls under EEE category (( EEE – exempt on contribution; exempt from the principal; exempt on interest) ) Exempted from tax calculation under Section 80C | The VPF falls under the EEE category | GPF is a EEE tax-free retirement-cum savings scheme. | The VPF falls under the EEE category |
| Loan facility | The employee should be in service for 5 years to be eligible to get a loan against PF | The employee should be in service for 5 years to be eligible to get a loan against PF | It can be availed at any time during the employment | Between the third and fifth financial year from the date of opening the PPF account, PPF loans can be availed against the account. |
| Lock in period | Can be closed while quitting the job permanently. Can be transferred while changing companies till retirement. The maturity amount is tax-free only on completion of 5 years. | same lock-in period as the EPF on resignation or within 2 months of unemployment. Partial withdrawal is allowed, but the withdrawal amount is tax-free only if the account is at least 5 years old | Can be closed while quitting the job permanently. Can be transferred while changing companies till retirement. | 15 years of the lock-in period. -duration can be extended by a block of 5 years -premature withdrawal allowed with certain conditions. |
| The interest rate in 2023 | 8.15 | 8.1 | 7.1 | 7.1 |
| Reliability | EPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks. | VPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks. | GPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks. | A Public provident fund / PPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks. |
From the above table, it is clear that if you are a working individual, then EPF / VPF is the best option for you considering the higher interest rate that you will receive in comparison to PPF. Also, EPF / VPF have an easier withdrawal option and transfer mechanism.
If you are not a working individual, then PPF is a great choice for you to secure a good interest rate with the peace of mind of having government security over your investments.
If you are a government employee, then you have the choice to invest in GPF, which is more or less similar to PPF.
Looking to save for retirement? Consider reading: National Pension Scheme (NPS)
What is EPF?
EPF is a mandatory savings scheme for salaried employees working in organizations that employ more than 20 workers. The scheme is managed by the Employees’ Provident Fund Organization (EPFO), a statutory body under the Ministry of Labour and Employment.
Under EPF, both the employer and the employee contribute 12% of the employee’s basic salary and dearness allowance to the EPF account every month. The employee can also contribute more than 12% voluntarily, which is called VPF (discussed later).
The EPF account earns interest at a rate decided by the EPFO every quarter. The current interest rate for EPF is 8.15% per annum for the financial year 2022-23. The interest earned on EPF is tax-free up to a limit of Rs. 2.5 lakh per annum under Section 80C of the Income Tax Act.
The EPF account matures on the employee’s retirement or resignation from service. The employee can withdraw the entire balance after retirement or after completing 58 years of age, whichever is later. The employee can also withdraw partially from the EPF account for specific purposes such as medical emergencies, education, marriage, house purchase or construction, etc., subject to certain conditions and limits.
The withdrawal amount is tax-free if the employee has completed five years of continuous service. Otherwise, it is taxable as per the employee’s income tax slab.
What is VPF?
VPF is an extension of EPF for salaried employees who want to save more than the mandatory 12% contribution. VPF allows the employee to contribute up to 100% of his or her basic salary and dearness allowance to the EPF account voluntarily. The employer does not have to match the VPF contribution of the employee.
The VPF account earns the same interest rate as the EPF account, which is currently 8.15% per annum for the financial year 2022-23. The interest earned on VPF is also tax-free up to a limit of Rs. 2.5 lakh per annum under Section 80C of the Income Tax Act. The VPF account follows the same maturity and withdrawal rules as the EPF account.
Consider reading: What is Voluntary Provident Fund and Latest interest rates
What is PPF?
PPF is a voluntary savings scheme for any Indian citizen who wants to invest in a long-term instrument with guaranteed returns and tax benefits. The scheme is managed by banks or post offices on behalf of the Central Government. Under PPF, the investor can open only one account in his or her name and deposit a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh per financial year.
The PPF account earns interest at a rate decided by the Central Government every quarter. The current interest rate for PPF is 7.1% per annum for the financial year 2022-23. The interest earned on PPF is completely tax-free under Section 80C of the Income Tax Act.
Consider reading: What is PPF and Latest Interest Rate
The PPF account has a lock-in period of 15 years, which can be extended for another five years at a time. The investor can withdraw up to 50% of the balance after completing six years from the date of opening the account. The withdrawal amount is also tax-free.
The investor can also avail loans against the PPF account between the third and fifth financial year from the date of opening the account.
Consider using our Online PPF Calculator to calculate the returns on your PPF investment.
What is GPF?
GPF is a compulsory savings scheme for government employees who joined the service before January 1, 2004. The scheme is managed by the Department of Pension and Pensioners’ Welfare under the Ministry of Personnel, Public Grievances and Pensions. Under GPF, both the employee and the government contribute 6% of the employee’s basic salary to the GPF account every month.
Consider reading: What is GPF and Latest Interest Rate
The GPF account earns interest at a rate decided by the Central Government every quarter. The current interest rate for GPF is 7.1% per annum for the financial year 2022-23. The interest earned on GPF is completely tax-free under Section 80C of the Income Tax Act. The GPF account matures on the employee’s retirement or death.
The employee can withdraw the entire balance after retirement or after completing 60 years of age, whichever is earlier. The employee can also withdraw partially from the GPF account for specific purposes such as medical emergencies, education, marriage, house purchase or construction, etc., subject to certain conditions and limits. The withdrawal amount is also tax-free.
EPF vs VPF vs PPF vs GPF: Where to Invest?
The choice of investing in EPF, VPF, PPF, or GPF depends on various factors such as your income level, risk appetite, liquidity needs, tax bracket, and retirement goals. Here are some general guidelines to help you decide:
- If you are a salaried employee working in an organization that offers EPF benefits, you should invest at least the mandatory 12% contribution to avail the high-interest rate and tax benefits. You can also opt for VPF if you want to save more than the mandatory limit and earn the same interest rate as EPF. However, you should be aware that VPF has low liquidity and a long lock-in period.
- If you are a self-employed individual or a non-salaried person working in an unorganized sector, you should invest in PPF as it offers a guaranteed return, tax benefits, and security. You can also invest in PPF if you are a salaried employee who wants to diversify your portfolio and have a separate account for long-term savings.
- If you are a government employee who joined service before January 1, 2004, you should invest in GPF as it offers a similar return and tax benefit as PPF, but with an additional contribution from the government. You can also invest in GPF if you are a salaried employee who wants to have a dedicated account for retirement planning.
FAQs on EPF vs PPF vs VPF vs GPF
Which is the best investment option EPF vs PPF vs VPF vs GPF?
If you are an employed individual then EPF / VPF is the best investment option for you as it offers a higher interest rate than PPF. PPF / GPF are also great investment options if you are not an employed individual.
Add ImageAre EPF and VPF same?
EPF – Employees provident fund is the default PF option that every working individual contributes to which is fixed at 12% of the basic salary. VPF is a voluntary option, if you opt for it then you can contribute a maximum of up to 100% of the basic. When you opt for VPF the amount gets accumulated in the same account as EPF.
Between EPF and PPF, which one gives higher interest?
As per the current interest rates, EPF gives 8.5% interest which is higher than the PPF interest rate which is 7.1%.
Should you go for PPF or VPF?
If you are a working individual then you should opt for VPF as it gives a higher interest rate than PPF. Also, PPF has 15 years lock-in period whereas VPF works the same way as EPF.
Is VPF and GPF the same?
No VPF is a Voluntary provident fund extension of EPF which is available to all salaried employees whereas GPF is a General provident fund which is available to only government employees. The interest rate in VPF is higher than GPF.
