The Government of India has launched several savings schemes which include GPF, EPF & PPF. Savings play an important part in an individual’s financial stability. So, it is necessary that you learn about the interest rates and the benefits of these savings schemes. So, in this article, we will learn the fundamental difference between GPF, EPF & PPF.
What is the difference between GPF, EPF & PPF?
General Provident Fund, GPF
GPF is a savings cum retirement scheme that is specifically available for government employees. All non-government employees are not eligible to contribute to a GPF account.
Any government employee who is a member of the GPF has to contribute a certain portion of the income regularly as long as they are employed. After retirement, the employee can withdraw the accumulated amount all at once.
The amount accumulated is also eligible to earn interest at a fixed rate. Right now, the GPF interest rate for the financial year is 7.1%.
Eligibility criteria for GPF
These are the following employees who are allowed to open an account under the general provident fund scheme:
- All the permanent government employees
- Re-employed pensioners
- The temporary government employees after continuously serving for one or more years.
All the government employees eligible for GPF have to contribute a minimum of 6% of their total salary towards GPF. However, the maximum amount that the individual can contribute is 100% of their income.
You can only stop contributing to GPF if you are suspended or retired. According to GPS rules, the contribution is stopped about 3 months before the individual is about to retire.
Tax benefits of GPF
The best part of the General Provident Fund is that it is a tax-free retirement savings scheme. Therefore the contributions, the returns, and the interest earned from it are exempted from tax calculation under section 80C.
Employees Provident Fund (EPF)
If you are looking for a retirement cum saving scheme similar to a general provident fund, you can apply for EPF. PF Registration is also mandatory for organizations that have more than 20 employees.
The interest rate of the balance present in your EPF account depends on the Employee’s Provident Fund Organization. For the financial year of 2022, the interest rate has been set at 8.5%. The interest rate is calculated per month and at the end of the financial year, the money is transferred to the account holder.
Eligibility criteria for EPF
The only criteria for EPF, the employee should be in an organization that has a minimum of 20 individuals.
Contributions for EPF
For Employee Provident Fund, both the employee and the employer have to contribute towards the employee’s EPF account through PF Registration. The standard contribution is 12% of the salary of the employee. However recently, the government has reduced the contribution to 10% for both parties.
Tax benefits of EPF
If the account holder withdraws the balance amount present in their EPF account after 5 years of account creation, it is exempted from tax. Also, any contribution made in an EPF account in a year within 1.5 lakhs is also eligible for tax exemption under 80C of the Income Tax Act, 1961.
Public Provident Fund(PPF)
Anyone interested in locking- in their contributions for a longer period of time can use PPF saving scheme. The interest rate on PPF is revised every quarter by the government. For the year 2022, the interest rate on PPF is set at 7.1%. The interest rate under the scheme is calculated on the basis of the lower balance between the fifth day and in a month till its last day. Therefore, any deposits made after the 5th of any month will not be included for interest calculation for that specific one.
Eligibility criteria for PPF
These individuals can hold an account under the PPF scheme:
- A resident who is an Indian citizen
- Minors can open an account as long as they are represented by the guardians
- NRI who have opened PPF accounts in India before leaving
Contributions for PPF
The account holder can make a maximum of 12 contributions per year. The minimum contribution that has to be made is Rs 500/ year. The maximum amount that can be deposited is Rs 1.5 lakhs.
Tax benefits for PPF
Under the Income Tax Act, the deposits made to the PPF account are eligible for tax exemptions provided it is less than Rs 1.5 lakhs. Additionally, the interest earned by the account holder on the balance amount and the maturity value is also exempted from taxation.
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