These various types of Provident Funds are used by organisations which can derive retirement benefits.
Provident fund is an investment fund that is voluntarily established by employers and employees to serve as long term savings to support an individuals’ retirement. There are various types of provident funds which are used by organisations to derive retirement benefits for the employees such as Employee Provident Fund (EPF), Public Provident Fund (PPF) and General Provident Fund (GPF).
Here are the differences and benefits of each Provident Fund:
1. Employee Provident Fund (EPF):
An employer contributes 12% of his/her basic salary and the employer makes a matching contribution. An employee may choose to increase their contribution level above 12%.
Benefits of EPF:
- Lump sum PF withdrawal at the time of retirement
- Regular pension under Employees’ Pension Scheme (EPS)
- Insurance benefit under Employees’ Deposit Linked Insurance (EDLI)
Out of the employer’s 12% contribution, 8.33% goes to EPS and rest goes to EDLI while the employees’ 12% contribution goes to EPF.
After consulting with the government the rate of interest is declared by the Employee Provident Fund Organisation (EPFO). The rate in comparison to the other two provident funds are higher.
Employer’s entire matching contribution up to 12 percent of the basic (Basic+DA) salary is tax free.
2. Public Provident Fund (PPF):
As the name suggests, everyone can access this fund, whether they are in the military, a business owner, a professional, or self-employed. Anyone with a PAN is eligible to register a PPF account for themselves and their minor children, and they are allowed to deposit up to Rs 1.5 lakh in total across all accounts opened using their PAN in a given fiscal year. A PPF account has a 15-year maturity period, which may be repeatedly extended for blocks of 5 years at maturity.
Benefits of PPF:
Government declares the rate of PPF on a quarterly basis and it is generally kept higher than the prevailing fixed deposit rates.
an account holder may withdraw the entire amount in lump sum or may extend the account for another 5 years with or without contribution, on maturity.
From the third to the sixth year, a PPF account holder may borrow against the deposit, and partial withdrawals are permitted once the sixth year is over.
3. General Provident Fund(GPF):
Government employees who began working for the government on or before December 31, 2003 and who are receiving pension payments under the Old Pension Scheme (OPS) for building up their retirement corpus are eligible for GPF. Government employees who qualify may contribute as much as 100% of their salaries, with a minimum contribution of 6%.
Only employees contribute to GPF just like PPF, but the difference between them is that GPF is not available to the general public and the investment limit has now been set at Rs 5 lakh in a financial year.
Benefits of GPF:
Investment in GPF is totally safe and the rate of interest offered is more than the prevailing FD rates.
At the time of retirement, money that has accumulated in the GPF may be withdrawn as a lump amount. For certain purposes, partial withdrawal options are available.
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 "PPF, EPF, GPF: What's difference between these plans and who should invest in what")
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