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Difference Between GPF, EPF, and PPF

The practice of saving begins as soon as an individual starts receiving his source of income.Are you someone with your source of income? Then you sure wouldn’t be new to the term we refer to as provident fund.

The word PF may not be a welcome abbreviation for all (no one likes those deductions on their monthly income). But it sure can come out as a savior on a later day in the long run.

If you are reading this article right now, you sure are one of those who know the importance of a provident fund, and are here to know more.

If yes, congratulations. Pat yourself first. Now, read on. This article is for wise individuals like you who are looking for smarter ways to handle their income. What better than first seeing the difference between GPF and EPF, difference between GPF and EPF and finally the difference between EPF and PPF?

GPF - If You Are A Government Employee

This is what you can expand to read as the General Provident Fund. Now, the general provident fund is the kind that one thinks of when he is thinking of his retirement saving schemes.
 

Here, you set aside every portion of your income regularly till the time you retire.

The minimum that you need to set aside should make up for six percent of your income. You can contribute more than this if you want to.

You can put a stop to the contribution in the case of a suspension that occurs or when you decide to retire.

However, in the case of retirement, make sure that you stop the contribution three months before you retire. The rest will then be taken care of according to the GPF rules.

Terms and Conditions

The sad part is that only those working under the government can find themselves eligible for this kind of provident fund.

Know that there are some terms and conditions for an individual to avail of a fund like this. For one, you need to be an employee working under the government.
 

However, if you are temporarily working under the government, there are chances that you too can avail of a fund like this. This is as long as you have been in continuous service for at least a year.

You can always avail this kind of fund if you are a pensioner who is reemployed by the government. However, you may not be eligible for this if you are already eligible for the contributory provident fund)

So, if you are a government employee, this is one kind of retirement scheme that you can rely on.

Then, what about those not working under the government, the kind that a lot of us come under today?

That brings us to the kind of provident. So if you are not a government employee, know that you still have hope and read on.

PPF 

This when expanded reads as the Public Provident Fund. Now, this is not for government employees alone.

You can avail this kind of savings scheme too. However, you must prepare to lock your contributions for quite a long period. This means careful expenditure without any thoughtless spending of money all the time.

In all, you can make an overall of twelve contributions. This is the maximum number of times you can contribute in a single year. Make sure that you set aside a minimum amount of ₹ 500 for this each year.

You can contribute more than this if you want to. But note that Rs 1.5 lakh is the maximum you can reach up to each year.

The one similarity between this and the general provident fund lies in the fact that in both cases, the government of India steps in every quarter for a revision of your interest rate.

So, if you’re planning on opening a PPF this year, know that the financial rate is a percentage of 7.1.
 

Here the calculations are on the basis of the lower balance between the fifth and the last day of the month.

This means that deposits that you make at any time between these days will not be taken into consideration when calculating the interest for that month.

Terms and Conditions
 

And yes, before we move on, note that you must first be an Indian citizen to be eligible for this provident fund.

If you are an NRI and not a resident of India, you should have at least had a PPF account created before having left India.

And if you are a minor citizen, you must be represented by your parents or some other guardians.

Also, remember that one cannot hold multiple PF accounts. Also, your account needs to be an individual one and you cannot hold an account jointly with another account.

EPF - For Employees In Organizations 

Now it comes to the employee’s provident fund. This one is very similar to the general provident fund except the fact that it is a must for any individual who works in an organization where the total number of staff is above twenty.

This is the only criterion required for one to be eligible for an EPF account. Also, this is one of the first things you remember in the gpf vs epf comparison.
 

This means most of us reading this fall under the eligibility for this kind of fund.

In other words, as a reader, you are probably an employee in a startup or an MNC. So you are very familiar with this kind of provident fund.

Here it is the Employee’s Provident Fund organization that sets the balance on this kind of fund. This is a percentage of 8.1 in the current fiscal year.

Here the interest gets calculated every month and the amount gets transferred to the individual’s EPF account on an annual basis.

Both the employer and the employee make the contribution here, setting aside 12 percent of an employee’s salary (which has recently been reduced to 10, so you have less to worry about)

And That’s the GPF, PPF and EPF Difference

There you are. These are the three kinds of provident funds that one can claim, the common being the last one.

That said, we hope this article educated you. So, make sure that it does not end here. As we sign, you on your part, keep reading and learning more about how to save your income so that way you won’t be in tears when one day, you won’t be relying on your source of income.

 

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

What are the benefits of EPF over PPF?

See, both are tax free and allow a user to withdraw from their funds after a period of five years. However, if you are working on a salary basis, EPF is always the better option of the two when it comes to your retirement plan.

What interest rate is higher, EPF or PPF?

The interest rate for an EPF stands at 8.1 percent, whereas that of EPF is slightly lower, standing at 7.1 percent.

So, this makes the EPF slightly higher than the PPF, though the difference is only a minor one.

Can a person have EPF and PPF?

Yes, an employee holding an EPF account is also allowed to hold a PPF account as there are no restrictions on the same.

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