Employee Provident Fund (EPF) vs Public Provident Fund (PPF) in 2019: Interest rates, withdrawal rules

New Delhi: The Employees’ Provident Fund Organisation (EPFO)-controlled Employee Provident Fund (EPF) remains an attractive investment option despite the 110 basis point cut by the Reserve Bank of India in the present calendar year. On the other hand, Public Provident Fund (PPF) witnessed an interest rate rationalisation along with several other small savings schemes in July this year. The government is likely to announce another modification in October on the rates applicable to various small saving schemes.

Earlier this week on Tuesday, the Labour Minister Santosh Gangwar said that the interest amount at the rate of 8.65 per cent will be credited in the EPF accounts of more than 6 crore individuals. While PPF offers an interest rate of 7.9 per cent after the interest rate revision in July on all the PPF accounts opened in the Jul-Sep quarter. With an interest rate of 8.65 per cent, EPF stands relatively attractive as compared to PPF.


However, the interest rate of 8.65 per cent on PF will be credited in the EPF accounts after the approval by the finance ministry. The rate of 8.65 per cent has been approved by the Central Board of Trustees for FY 2018-19 in February this year. The apex decision-making arm of EPFO which decides the rates on EPF may rationalise them in accordance with the massive cut by the RBI this year. The Reserve Bank has reduced the key repo rates in each of the Monetary Policy Committee (MPC) meetings held in February, April, June and August.

A person is allowed to withdraw the money from the EPF and PPF account on the completion of the maturity period. PPF has a lock-in period of 15 years, whereas EPF has a lock-in period of 5 years. However, there are special provisions in which partial withdrawals are allowed from the EPF and PPF account. In case of EPF, a person is allowed to withdraw a definitive amount in case of unemployment, retirement, marriage/education of children, illness, loan repayment, purchase of land/house, renovation of house etc.

As per the notified guidelines for PPF account, an individual is eligible to withdraw a maximum of 50 per cent of the deposit underlying in the PPF account only after completion of five years. The five-year term is calculated after excluding the first financial year, therefore, the effective eligibility for partial withdrawal from the PPF account is after completion of six years.

The complete withdrawal from the PPF account is only allowed after the completion of maturity, i.e., 15 years. However, the government allows terminating the PPF account in case of medical emergencies, life-threatening diseases, death and for the purpose of higher education. The amount withdrawn at the maturity date and the interest earned during the course of 15 years is tax-exempt.




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