EPF vs PPF: Interest rates, tax benefits, eligibility, withdrawal rules compared

EPF vs PPF: The Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF) are among India’s most popular long-term savings schemes. Both offer government-backed security, fixed returns and tax benefits, but they are designed for different types of investors. EPF is mainly meant for salaried employees working in the organised sector, while PPF is open to all Indian citizens, including self-employed individuals. The two schemes differ in eligibility, contribution structure, lock-in period, withdrawal rules and interest rates. Here is a detailed comparison of EPF and PPF, including tax rules, maturity period and who should invest in each scheme.

What is EPF?

EPF is a retirement savings scheme managed by the Employees’ Provident Fund Organisation under the EPF Act, 1952.

Under the scheme, both employer and employee contribute a fixed portion of salary every month. The accumulated corpus, along with interest, can generally be withdrawn at retirement or under specific conditions.

EPF is primarily available to salaried employees working in establishments covered under EPF rules.

EPF eligibility rules

EPF registration is mandatory for:

• Establishments employing 20 or more workers
• Employees earning up to Rs 15,000 monthly basic salary plus Dearness Allowance (DA) at the time of joining

Employees earning above Rs 15,000 can also join voluntarily with employer approval.

Once enrolled, the employee remains an EPF member even if salary increases later.

EPF contribution rules explained

Under EPF rules:

• Employees contribute 12 per cent of their basic salary and DA
• Employers also contribute 12 per cent

Employees can additionally contribute more through the Voluntary Provident Fund (VPF).

The EPF amount builds over time through monthly contributions and annual interest credit.

EPF interest rate 2026

The current EPF interest rate is 8.25 per cent per annum.

The interest rate is reviewed annually by the government based on recommendations from the EPFO.

EPF currently offers higher returns than PPF, making it attractive for salaried employees seeking long-term retirement savings.

EPF tax benefits

EPF investments qualify for tax deductions under Section 80C of the Income Tax Act.

Key tax benefits include:

• Employee contribution up to Rs 1.5 lakh eligible for deduction under the old tax regime
• Employer contribution up to prescribed limits remains tax-free
• Interest earned on employee contribution up to Rs 2.5 lakh annually is tax-free
• Maturity proceeds are generally tax-exempt subject to conditions

EPF withdrawal rules

Partial EPF withdrawals are allowed for specific purposes such as:

• Medical emergencies
• Higher education
• Marriage
• Home purchase or construction

Full withdrawal is generally allowed:

• At retirement
• After two months of unemployment

In most job changes, the EPF balance is transferred instead of withdrawn.

What is PPF?

PPF is a government-backed small savings scheme designed for long-term wealth creation and tax savings.

Unlike EPF, PPF is voluntary and open to all Indian citizens, including salaried and self-employed individuals.

The scheme currently offers 7.1 per cent annual interest, revised quarterly by the government.

Who can open a PPF account?

PPF accounts can be opened by:

• Salaried individuals
• Self-employed professionals
• Non-salaried individuals
• Parents or guardians on behalf of minors

Accounts can be opened through post offices and authorised banks.

PPF investment limit and lock-in period

The minimum yearly investment in PPF is Rs 500.

The maximum annual investment limit is Rs 1.5 lakh.

PPF comes with a 15-year lock-in period, making it a long-term investment product.

After maturity, investors can:

• Withdraw the full amount
• Extend the account in five-year blocks
• Continue with or without fresh contributions

PPF interest rate 2026

The current PPF interest rate stands at 7.1 per cent annually.

Interest is compounded yearly and remains fully tax-free.

Though the rate is lower than EPF, PPF remains popular among conservative investors because of government backing and guaranteed returns.

PPF tax benefits explained

PPF falls under the Exempt-Exempt-Exempt (EEE) category. This means:

• Investments qualify for Section 80C deduction
• Interest earned is tax-free
• Maturity amount is fully tax-free

This makes PPF one of India’s most tax-efficient long-term savings options.

PPF withdrawal rules

Partial withdrawals from PPF are allowed after completion of five financial years.

Full withdrawal is permitted after the 15-year maturity period.

Loans against PPF balance are also available under prescribed conditions.