Is it better to invest in PF or PPF?

With increasing awareness about the benefits of investment and the security it provides, more and more people are now trying to understand which options are better for them. While many prefer short-term investments, there are a lot of people who opt for long-term investments for a steady and assured growth of their money.

long-term investments are probably the best option for those with a longer vision and when it comes to that, the two most popular investment options are Employee Provident Fund (EPF) or Public Provident Fund (PPF). Both the funds are used for long-term investment purpose and give you an assured return in the end.

But, what are the pros and cons of EPF and PPF?

The first and most important factor that should decide what you choose is whether you are a salaried employee or a self-employed person? Because, if you are employed then it has been mandated by the government that a part of your salary be used to invest in the EPF.

What is the best part? The employer has to make an equal contribution to the employee’s EPF. On the other hand, PPF can be seen as an alternative for all those who are self-employed but want to invest in a safe and secure fund like EPF.

If we look at both these funds on a whole then there are not many differences that can be used to prove that one of it is better. However, EPF has a few extra benefits which are not available to those who invest in PPF.

The first benefit, as discussed above, is that the employer has to make an equal contribution to your EPF account every month while investing in PPF means you have to make the entire contribution.

Secondly, if you resign from a company then you are eligible to withdraw your EPF amount. Also, you can withdraw the money for the personal purpose by depositing relevant documents. However, PPF comes with a lock-in period of 15 years and you can avail a loan on it only from the sixth year.

Both EPF and PPF are seen as retirement funds and their rate of return is almost similar. Therefore, there are no advantages when it comes to getting a return on the investment. The rate of return stands close to 8 percent making both EPF and PPF a reliable investment option.

Lastly, both these funds are liable for tax exemption under the section 80C. Also, there is no tax applied on the final amount which is withdrawn after maturity. However, when it comes to EPF, if you make your withdrawal before a period of five years, you have to pay the tax on the amount.

So, what are you going to choose as your retirement fund?