Tax & Savings
EPF vs PPF
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Employer-matched EPF vs voluntary PPF — both are tax-free, both are essential. Know the difference.
What EPF and PPF Actually Mean
EPF. The Employees’ Provident Fund — a workplace scheme. You contribute 12% of basic pay and your employer matches it, of which 3.67% goes to EPF and 8.33% to the pension scheme, EPS. The rate is declared annually by EPFO and is 8.25% for FY 2025–26.
PPF. The Public Provident Fund — open to anyone, employed or not. You decide what to put in, up to ₹1.5 lakh a year, for 15 years. The rate is reset quarterly by the government and is 7.1% currently.
These are not really alternatives for most salaried people, because EPF is not optional and PPF is. The practical question is almost always whether to add PPF alongside an EPF you already have — not which of the two to pick.
Key Differences
| Feature | EPF | PPF |
|---|---|---|
| Mandatory? | Yes — for employees ≥ 20 employees | Voluntary |
| Employer contribution | 12% of Basic+DA | None |
| Interest rate | 8.25% (FY 2024–25) | 7.1% p.a. |
| Withdrawal | At retirement/resignation (5yr for tax-free) | At 15 years maturity |
| Tax status | EEE (within limits) | Fully EEE |
| Current rate | 8.25% for FY 2025–26, declared annually by EPFO | 7.1% currently, reset each quarter |
| Who can open it | Salaried employees at covered employers | Anyone, including the self-employed |
| Employer contribution | Yes — effectively part of your pay | None |
| Annual limit | Linked to salary; contributions above ₹2.5 lakh have taxable interest | ₹1.5 lakh |
| Withdrawal tax | Tax-free after 5 years of continuous service | Always exempt at maturity |
When to Choose Which
Choose EPF
- You are salaried — this is automatic
- Employer contribution doubles your corpus
- 8.25% guaranteed is higher than PPF
- Only investment = steady salary deductions
Choose PPF
- Self-employed or freelancer (no EPF)
- Want to contribute beyond EPF maximum
- Additional tax-free savings beyond EPF
- Long-term safe corpus (15yr)
Worked Examples
The right comparison depends on your employment situation.
| Scenario | EPF | PPF |
|---|---|---|
| Salaried with EPF | Already running — and the employer match is free money | Optional addition for money beyond EPF |
| Self-employed | Not available | The main option of this type |
| Changing jobs | Transfer the account — do not withdraw and restart | Unaffected by employment |
The third row is where real money is lost. Withdrawing EPF at a job change resets the five-year continuous-service clock and can make the withdrawal taxable. Transferring the account preserves both the tax treatment and the compounding.
How Each Is Taxed
Both are broadly EEE, but each has a condition worth knowing. For EPF, interest on employee contributions above ₹2.5 lakh in a financial year is taxable — relevant for higher earners and anyone making voluntary contributions. Withdrawal is tax-free after five years of continuous service; below that, TDS of 10% applies once the amount exceeds ₹50,000, or 30% if PAN is not on record, and Form 15G or 15H can be filed if total income is below the taxable limit. Service across employers counts as continuous provided the balance was transferred rather than withdrawn. For PPF, interest and maturity are exempt with no threshold. Note that the 80C deduction on either contribution applies only under the old regime — but the exemption on interest and maturity holds under both, which is what makes them attractive even without a deduction.
These rules apply to both FY 2025–26 and FY 2026–27 — Budget 2026 made no change to capital gains rates or holding periods.
Advantages and Limitations
EPF
Works for you when
- The employer contribution is effectively additional pay
- The rate has been higher than PPF
- It happens automatically, with no decision required
Watch out for
- Only available through covered employment
- Interest on your own contributions above ₹2.5 lakh a year is taxable
- Withdrawing at a job change can cost you the tax exemption
PPF
Works for you when
- Open to anyone, including the self-employed
- Interest and maturity exempt with no threshold
- You control the amount, from ₹500 to ₹1.5 lakh a year
Watch out for
- No employer contribution
- ₹1.5 lakh annual cap
- 15-year commitment, with limited access after year 5
How to Decide
For most people this is not an either-or.
- Are you salaried with EPF? Then it is already running, and the employer match makes it the first place your retirement money should sit.
- Do you want more safe long-term money beyond EPF? PPF is the natural addition, up to ₹1.5 lakh a year.
- Are you self-employed? PPF, since EPF is not available to you.
- Changing jobs? Transfer the EPF account rather than withdrawing — withdrawal can trigger tax and resets the clock.
- Are your own EPF contributions above ₹2.5 lakh a year? Interest on the excess is taxable, so check whether PPF or another route is better for the surplus.
A common structure is EPF for the automatic core, PPF for additional safe money, and equity for the growth neither of these is designed to provide.
Frequently Asked Questions
Sources and Method
Figures on this page are computed by the calculator above from the inputs you enter. Worked examples assume the stated return is earned evenly and ignore exit load, expense ratio and inflation, so treat them as illustrations of the mechanism rather than forecasts.
- Capital gains treatment — Income Tax Act, sections 111A and 112A, as amended by the Finance Act 2024 and unchanged by Budget 2026.
- Rupee cost averaging — AMFI investor education.
- Mutual fund product rules — SEBI (Mutual Funds) Regulations.
Last reviewed 17 August 2026. This page explains how two investment methods behave. It is general information, not investment advice, and mutual fund investments carry market risk.
The concept behind the number
This comparison gives you a figure. These pages give you the idea it comes from, the words on the inputs, and the article that works through the decision.