What is EPF, VPF, GPF & PPF | Difference and comparison | Explained by Technical Jhaji ( in Hindi ).
EPF, Aimed at promoting long-term retirement savings, under the EPF scheme, the employer and the employee each contribute 12% of the employee’s basic salary. The employee can transfer the contributed EPF amount from one organisation to another if there is a change in job or withdraw the money if unemployed.
The EPF account holder can withdraw 75% of the total EPF if he/she is unemployed for a minimum of one month and the remaining 25% can be withdrawn after 2 months of being unemployed. The employer contributes 8.33% of the 12% towards the EPS account while the remaining 3.67% goes into the EPF account. The entire 12% contributed by the employee goes into the EPF account. If all the KYC details are updated on the EPFO website, the employee will be able to place a request online for the withdrawal of the EPF amount. If the KYC details do not match, the employee will need the help of the employer to withdraw the EPF amount.
Benefits of EPF
Some of the key benefits of EPF are:
For funds held in an EPF account, the interest earned is tax-free under certain conditions. Also, under 80C of the Income Tax Act, tax is deductible for contributions made towards an EPF account
A very good savings option which provides long-term investment.
Ability to transfer funds in case an employee changes organisation, as all EPF accounts come under one UAN.
Is considered as one of the best savings options in case of retirement, emergencies as well as a back-up for an employee who cannot work for some reason.
The employee is insured as the employer must contribute towards life insurance, under the Employees’ Provident Fund and Miscellaneous Act, 1952.
How does a PPF account operate?
It is an investment scheme mainly designed for the self-employed individuals and workers of unorganized sectors to provide them with income security at old age. It is fixed income security scheme that enables you to invest a minimum of a minimum amount of Rs. 500 and a maximum of Rs. 1, 50,000. You can guaranteed and tax free returns by investing in a PPF account.
What is a VPF account?
The Voluntary Provident Fund account is another investment option that helps a salaried individual to save more towards their retirement, apart from the mandatory deduction of 12% of the basic salary. Voluntary Provident Funds can be accessed by salaried individuals only. However, employers cannot force an employee to contribute to VPF. It is a voluntary move taken by an employee.
Difference between PPF and VPF
There are some differences exist between a PPF account and VPF account. Listed below are the key difference between both accounts:
A VPF account is only meant for salaried employees while a PPF account can be opened by self –employed and people working at unorganized sectors.
Interest offered on a VPF account is same with an EPF account which is 8.75%. On the other hand, a PPF account offers 8.7% on your savings.
Returns received from a PPF account are free from income tax. On the other hand contributions made towards a VPF account qualifies for tax deduction under Section 80C of the Indian Income Tax Act, 1961.
In case of a PPF account, the deposited amount cannot be withdrawn unless the account matures. The maturity period of a PPF account is 15 years. But when it comes to VPF accounts, employers can withdraw funds as and when they need to meet their financial requirements. However, if an employee withdraws funds from a VPF account before the account completes 5 years, the amount will taxed.
General Provident Fund
GPF stands for General Provident Fund. It is a provident fund account available for the government employees. In this fund, the government employees contribute a certain percentage of their salary to the account. The accumulated amount is paid to the employee at the time of superannuation or retirement.
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