Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India. It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them.

Employee Provident Fund ( EPF) is one of the main platforms of savings in India for nearly all people working in Government & Public sector  Organizations. It is important for every working individual to understand the importance of EPF.

What is Public Provident Fund(PPF)?

The Central Government has established the Public Provident Fund for the benefit of general public to mobilize personal savings. A salaried employee can simultaneously become a member of employees’ provident fund and the public provident fund.

The account can be opened in designated post offices, State Bank of India branches and branches of some nationalised banks. ICICI Bank was the first private sector bank which was authorized to open PPF accounts.

What is Employees Provident Fund (EPF)?

The Employees' Provident Fund Organisation is a statutory body of the Government of India under the Ministry of Labour and Employment. It administers a compulsory contributory Provident Fund Scheme, Pension Scheme and an Insurance Scheme. It is one of the largest social security organisations in the world in terms of the number of covered beneficiaries and the volume of financial transactions undertaken.

A retirement plan for the private and public sectors in Malaysia, enacted by the Employees Provident Fund (EPF) Act of 1991, intended to help employees save a portion of their salary in the event of retirement, disability, sickness or unemployment. As of 2007, employees are required to contribute at least 11% of their paycheck, with their employers contributing at least an additional 12%. The savings can then be used by the EPF for a wide variety of investments, and the participating employees are repaid through reinvested dividends. Employees may withdraw 30% of their accumulated EPF savings at age 50, and 100% at age 55.

Features of PPF

The public provident fund is established by the central government. One can voluntarily open an account with any nationalized bank or post office. The account can be opened in the name of individuals including minor.

The minimum amount is Rs.500 which can be deposited The amount deposited is eligible for tax benefit u/s 80-C. The rate of interest at present is 8.8% per annum, which is also tax-free. The entire balance can be withdrawn on maturity. Interest received is tax free. The maximum amount which can be deposited every year is Rs. 1, 00,000 in an account. The interest earned on the PPF subscription is compounded All the balance that accumulates over time is exempt from wealth tax. Moreover, it has low risk – risk attached is Government risk. PPF is available at selected post offices and banks.

Pros of PPF
  • Lowest risk possible
  • Tax rebate on money invested
  • Great returns
  • No tax on interest earned
  • Flexibility of investment
  • Exempt from all wealth tax
Cons of PPF
  • The interest rate keeps changing
  • Lengthy lock-in period
  • Interest is calculated on the lowest balance
  • Lack of liquidity
Benefits of Employee Provident Fund

EPF scheme benefits employees in following essential needs:

  • Retirement
  • Medical Care
  • Housing
  • Family obligation
  • Education of Children
  • Financing of Insurance Polices

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