PPF vs GPF vs EPF
Public Provident Fund – PPF
The PPF, or public provident fund, is one of the most popular investment options for tax savings and accumulating long-term wealth. PPF, a 15-year investment scheme, can be extended in blocks of five years. It also offers partial withdrawal and loan facility. In terms of income-tax implications, the PPF offers the exempt, exempt and exempt advantage: money invested up to Rs 1.5 lakh in a financial year, interest earned and the maturity proceeds are not taxable in the hands of the investor. The interest rate on the PPF, like other small saving instruments, is revised every quarter. For the current quarter (October-December), investors will earn interest at 8%.
If a PPF subscriber fails to deposit the minimum amount of Rs 500 in a financial year, the account is treated as discontinued. The subscriber cannot obtain loan or make partial withdrawals unless the account is revived.
Who can open PPF Account?
- Indian residents of age 18 years and above can open PPF account. Only one account per person can be opened.
- PPF account can also be opened in the name of minor. Parents can open PPF account in the name of their children, but grandparents cannot open the account in name of their grandchildren.
- Non- Residents of India are not eligible to open PPF account. However, NRIs of Indian origin who earlier had PPF account can continue their account until the lock in period of 15 years ends.
- Hindu Undivided Family cannot open PPF account but the account opened before 13th May, 2005 can be continued without any further extensions in maturity period.
PPF loan facility rules
1) A PPF subscriber is allowed to take a loan from his PPF account from the third financial year. And this loan facility against the PPF account is available only till the end of the sixth financial year.
2) But the loan amount cannot exceed 25% of the balance available in the PPF account at the close of two years immediately preceding the year in which the loan is being applied for.
3) For example, if a PPF account was opened in 2017-18, the first loan can be taken only from 2019-20. A PPF subscriber cannot take a new loan until the old loan has been paid off.
4) A loan can be taken only once in a year even though the loan taken in the year is repaid in the same year.
5) A PPF subscriber needs to submit Form D for a loan request. Interest is charged at 2% over the PPF interest rate. And the loan taken from the PPF account has to be repaid within 36 months.
PPF Interest Rates
The PPF rate for July – October 2018 is 7.6% .The PPF rate for October – December 2018 is 8%.
How does PPF calculator work?
- PPF calculator calculates the interest for every year on the basis of initial details given by you. You are required to choose the type of deposit (fixed amount or variable) and the amount deposited every year.
- It is assumed that you are depositing the amount on 1st April every year. Then the interest is calculated for financial year based on the prevailing market rate.
- PPF interest calculator also gives you an estimate about the total amount of investment made by you till a particular year.
General Provident Fund – GPF
GPF or General Provident Fund account is a provident fund account which is available for government employees. A government employee can become a member of the fund by contributing a certain percentage of their salary to the account. The accumulations in the fund are paid to the government employee at the time of superannuation or retirement.
Who can open GPF Account?
Temporary government servants after continuous service of one year and permanent Government servants shall subscribe to GPF compulsorily. However temporary government servants may subscribe to GPF even before completion of one year’s service.
How does GPF Work?
General Provident Fund is a savings tool for individuals employed with the government in India. In the account, the account holder contributes a part of their salary into the account in regular installments for a certain period of time. The money from the fund will be given to the employee when they retire or at the time of superannuation. The account holder can nominate a nominee at the time of opening the account. The nominee will receive the benefits from the account if anything should happen to the account holder.
GPF has a feature known as GPF advance which is an interest free loan from the general provident fund savings. The amount borrowed should be paid back in regular monthly installments. No interest will be paid on the GPF cash advance taken. One can take as many GPF advances as needed in their career.
Rate of Interest for GPF
Rate of Interest for General Provident Fund is fixed every year by the Government. The present rate of interest is 8%.
Employee Provident Fund -EPF
The Employee Provident Fund, popularly known as PF is the retirement saving scheme available to all the salaried employees, is backed by the government on which fixed interest is paid.
The employee provident fund is administered by the Employees Provident Fund Organization (EPFO), a statutory body developed by the government of India under the Ministry of Labor and Employment. It is formed to administer the mandatory contribution towards the PF scheme by both the employees and employers.
Who can open EPF Account?
As per the rules of EPF, both the employer and the employee need to deposit money into EPF in equal proportion. In order to open a PF account, the employer would need the employee to sign a form in triplicate, with all his details and the name of the nominee to the account. The form is then send to the EPFO where it is processed and a PF account number is generated for the employer and the employee to and the employee to deposit funds into it every month as per the provisions of the Provident Fund Act 1952.
How EPF Works?
Calculation of the EPF amount involves the following steps: Identify your EPF contribution – This amount usually appears on your pay slip as ‘PF deduction’. It will be either 12% of (Basic Salary + Dearness Allowance, if applicable) or 12% of Rs.15, 000 i.e., Rs.1, 800.
Interest on EPF
The compound interest that’s decided upon by the government and central board of trustees is paid on the amount standing to the credit of the employee as on the 1st of April every year.
While your contributions are made monthly, the interest is calculated yearly. At the start of every year, you have an opening balance (which is the amount accumulated till that point). Your opening balance for the next year would be: opening balance + total monthly contributions + interest on the (old opening balance + contribution)
It’s important to note that interest will only accumulate on your EPF balance and not on the funds that your EPS balance, as EPS is a pension scheme.