The three major government-backed retirement plans, Employee Provident Fund (EPF), Voluntary Provident Fund (VPF), and Public Provident Fund (PPF), operate differently in terms of interest rates, taxation, and withdrawal guidelines. Your unique financial objectives, eligibility, and circumstances all play a role in selecting the best provident fund programme. Generally speaking, EPF and VPF are excellent choices for those who are salaried, while PPF is strongly advised for those who are self-employed. In terms of taxation and withdrawal rules of EPF, VPF, and PPF, investors should be much aware of while taking investment decisions, let’s know from our industry experts what they have to comment on this.
Dr. Suresh Surana, Founder, RSM India
The tax treatment for EPF (Employee Provident Fund), VPF (Voluntary Provident Fund) and PPF (Public Provident Fund) are as follows:
Pratik Vaidya MD, and CVO, Karma Global
Provident funds are one of the most popular investment options in India, offering financial security and stability in the future. There are three main types of provident funds in India, namely the Employees Provident Fund (EPF), Voluntary Provident Fund (VPF), and Personal Provident Fund (PPF). In this article, we will compare these three schemes to help you understand which one is best for you.
Eligibility: EPF is mandatory for employees working in organizations registered under the EPFO (Employees’ Provident Fund Organisation, established via the Employees’ Provident Fund and Miscellaneous Provisions Act 1952), whereas both VPF and PPF are open to all individuals, including non-salaried employees and those from the unorganized sector.
Contribution: EPF mandates a contribution of either 12% of an employee’s Basic + Dearness Allowance and the employer is also obligation to pay an equal percent of contribution, whereas both VPF and PPF contributions are voluntary. Only salaried individuals can sign up for VPF, whereas both salaried and non-salaried individuals can contribute to PPF.
Tax Benefits and Returns: Tax Benefits have been given to all three schemes under Section 80C of the Income Tax Act. However,10% TDS is deducted on EPF Balance if it is withdrawn before completion of 5 years of service if the amount is above Rs. 50000/-, Whereas in terms of Returns, both EPF and VPF offer the same rate of interest, which is currently 8.15% per annum. Whereas PPF offers a slightly higher interest rate of 7.1% per annum, compounded annually.
Withdrawal: EPF offers partial and complete withdrawal options, subject to certain conditions such as when the employee remains unemployed for 2 months. VPF allows for complete withdrawal but only after completion of 5 years and it is taxable if withdrawn before the lock-in period, whereas PPF has a lock-in period of 15 years, after which partial withdrawals are permitted.
Pros and Cons: EPF offers a guaranteed rate of return and is risk-free, making it an ideal investment tool for retirement planning, since the contribution percentage is fixed and it is mandatorily payable by both the employee and the employer. While VPF offers similar benefit with the added advantage of a higher contribution amount, but it is only open to salaried individuals and the employer is not liable to contribute an equal amount. Whereas, PPF offers a higher rate of interest and is open to all individuals, but it has a long lock-in period, limited withdrawal options and no involvement of the employer…. Read More
Source By: livemint
