The Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF) are two of the most important money-making tools for everyone who aspires to a comfortable life after having done with employment. Yes, both these tools are what can provide to their investors returns over time that are simply mind-blowing and that too without risk simply because they are backed by the government. Now, most employees generally try to complete their tax saving duties by adhering to the section 80c requirements that often are met by EPF, Equity Linked Savings Scheme (ELSS), Home Loan Principal Repayment. and insurance. And that means, they do not take PPF too seriously. However, they need to look at it much more closely to ensure they get a huge amount of money when they retire or during an emergency. After all, where else do you get returns in terms of interest, in excess of 7 percent without some risk on a long-terms basis? While PPF interest rate is as high as 7.1%, EPF interest rate is even higher at 8.25% for now. That means, investors must ensure they take full advantage of both EPF and PPF tools.
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While your EPF payments are decided by your salary, you could boost the same a bit by going for VPF too. On the other hand, even if you fill your 80c requirements to save income tax, you must ensure that you keep investing on a regular basis in PPF. Ideally, you should hit the Rs 150,000 mark every year. Or at least try to do the best possible that you can. The best strategy is to go and deposit the Rs 150,000 amount in PPF at one go in the first week of April when the fiscal actually starts. That way you will get full benefit of the entire 12 months in terms of interest you get. And that will not just impact your current year’s earnings from it positively, it will have a cumulative impact over the years because of the magic of compounding.
So, in brief, the important part is to be familiar with the basic points of both and not get confused between the two. That can be done easily by knowing some of the differences between both.
EPF is a compulsory savings scheme where a certain part of the salary is cut by the employer. EPF account holders have no choice but to invest every month. The PPF payments are entirely voluntary and the investor has the choice of not paying anything at all. However, do note that in PPF you need to invest at least Rs 500 per year to keep the account active.
Notably, PPF has a big lock-in period of 15 years although you can withdraw some amounts during emergencies after a certain period of the account being opened. EPF is a scheme that also allows withdrawals at times when the account holder loses his job and is unemployed for a lengthy period of time.
EPF and PPF will virtually guarantee a good retirement for every employee who has these two tools. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
