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Right Investment Option for a Salaried Person from EPF or PPF

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When looking for secure investment options, you might have come across the three prominent investment options in India viz. Employee Provident Fund (EPF)/ Provident Fund (PF), Public Provident Fund (PPF), and Fixed Deposit (FD). While EPF is a mandatory retirement savings option for salaried employees falling under the eligibility criteria, PPF and FD are optional investment tools for salaried person available in India.

Employee Provident Fund

The Employee Provident Fund (EPF) or the Provident Fund (PF) is a type of investment option monitored by the Employees’ Provident Fund Organization (EPFO) under the governance of the Government of India. The scheme aims at providing retirement benefits as well as social security to the Indian salaried employees. In an EPF, an employee contributes a portion of his/her salary every month to the employer until retirement or resignation from the company. The employer after adding an equal contribution to the same transfers the money to the employee’s EPF account. You can choose to use the amount in the PF account to avail a loan, or you can choose to save it for the post-retirement living costs.

Public Provident Fund

Unlike an EPF account, you need not depend on your employer to accumulate money for your retirement years. You can voluntarily invest your money just like other investing instruments with a Public Provident Fund (PPF). However, the advantages of investing in a PPF is that the returns you receive is higher than that of the conventional investment schemes. PPF is initiated under the Public Provident Fund Act 1968. In this scheme, any Indian citizen, as well as their children, can contribute to the aPPF account. Also, the individual does not need to be a salaried person to open or access a PPF account. Under Section 80C, you can also avail tax benefits for a PPF. Also, you can avail a high annual interest rate from PPF saving.

Difference between EPF and PPF

EPFPPF
Only salaried employees are eligibleBoth self-employed and salaried employees are eligible. Unemployed individuals are also qualified
The employee and the employer contribute togetherOnly the account holder contributes
It is payable at the time of retirement. In the incident of death, it will be paid to the direct heir.It is payable after 15 years which is the lock-in period. This period can, however, be extended to 5 years after the maturity.
Tax deduction up to Rs. 1,00,000 under Section 80CTax deduction up to Rs. 1,00,000 under Section 80C
Withdrawal before 5 years is taxableNo tax is applied on the maturity returns from the account
You can make premature withdrawals only for specific reasons like daughter’s wedding or for purchasing a housePremature withdrawal permitted between 3years – 6 years. Complete withdrawals can be made past 6 years.

What Would be the Best Choice from EPF and PPF?

From an EPF and a PPF, the best choice for a salaried person would be to invest in a PF as he/she can share the amount to be invested with his/her employer. Also, a PF/EPF provides high interest rates as compared to a PPF account, i.e. 8.55%. The government of India determines the rate of interest as well as the returns provided by the EPF account. Apart from this, if you want a stable investment with higher yields than EPF, you can opt for an FD (Fixed Deposit). Leading NBFCs (Non-Banking Financial Companies) like Bajaj Finance is accredited from CRISIL as FAAA and ICRA as MAAA stable rating. The company offers FD with the highest interest rates in India (8.75% to 9.10%). Also, if you open Fixed Deposit for Senior Citizen with Bajaj Finance, you can avail a 0.35% increased Senior Citizen Fixed Deposit Interest Rates.

To open a Fixed Deposit account, you need to deposit a lump sum amount for fixed FD interest rates and tenor. This deposit is known as the principal amount. FDs offer higher interest rates than the conventional savings account. There are two types of FD viz. Cumulative FD and Non-Cumulative FD. If you choose cumulative FD, on maturity, the interest rate along with the invested money is payable to you. If you opt for non-cumulative FD, you can select the frequency of interest payout from monthly, quarterly, half-yearly and yearly basis as per your convenience.

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