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EPF vs VPF vs PPF: Taxation and withdrawal tips outlined

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Dr. Suresh Surana, Founder, RSM India

The tax remedy for EPF (Employee Provident Fund), VPF (Voluntary Provident Fund) and PPF (Public Provident Fund) are as follows:

ParticularsEPF (Employee Provident Fund)VPF (Voluntary Provident Fund)PPF (Public provident fund)MeaningEPF is a provident fund created with a purpose to produce financial stability and security on the time of retirement. Under this scheme, salaried staff working in group registered beneath EPFO are mandatorily required to contribute 12% of the Basic Salary + Dearness Allowance, the employers are required to contribute an amount at par with the employee’s contribution.VPF is an extension of the employee provident fund. Hence, beneath VPF, an employee might make most contribution of as a lot as 100% of his Basic Salary and Dearness Allowance.PPF is a authorities assured mounted earnings security scheme accessible for all and by no means restricted solely to staff.TaxationThe tax implication for EPF would depend on the character of the Provident fund i.e. whether or not or not it is recognised or unrecognised as follows:

The tax implications of VPF are as follows:

(i)  Any contribution made to VPF could possibly be allowed as a deduction beneath Section 80C matter to the brink of Rs. 1.5 lakhs.

(ii)  Further, any curiosity earned on VPF could possibly be exempt from tax. However, any curiosity to the extent it pertains to amount of PF contribution exceeding Rs. 2,50,000/-   made by staff could possibly be taxable.

For the goal of computing the curiosity on VPF/ RPF, the annual provident fund assertion could possibly be maintained in two separate parts-taxable and non-taxable contribution accounts with impression from the financial 12 months 2021-22 onwards:

–   The non-taxable contribution account starting from the financial 12 months 2021-22 shall have the small print of opening steadiness, contribution underneath the brink, curiosity earned on such contribution and withdrawals made throughout the associated 12 months.

–  The taxable contribution account starting from the financial 12 months 2021-22 shall have the small print of the contribution made above the brink, curiosity earned thereon and withdrawals made throughout the associated 12 months.

(iii)  Any lumpsum amount earned from RPF and VPF could possibly be exempt from tax provided the withdrawal is made after 5 years. In case of partial or full withdrawal sooner than such interval of 5 years, the an identical could possibly be matter to tax.

Investment in PPF is allowed as deduction u/s 80C matter to threshold of Rs. 1,50,000/-.

The PPF curiosity and maturity amount are moreover tax-exempt u/s 10(11) of IT Act.

 ParticularsRecognized PFUnrecognized PFEmployer’s ContributionTaxable as “salary” u/s 17(1) if such contribution exceeds 12% of wageNo taxability on the time of contributionEmployee’s ContributionContribution made by employee is eligible for deduction u/s 80C matter to threshold prohibit of Rs. 1.5 lakhsNot eligible for Deduction u/s 80CInterest credited on Employee’s ContributionIt is taxable as wage u/s 17(1) to the extent such curiosity exceeds 9.5% p.a.No taxability (on the time of credit score rating) Taxable on the time of termination beneath ‘Other Sources’Interest credited on Employer’s ContributionIt is taxable as wage u/s 17(1) to the extent such curiosity exceeds 9.5% p.a.No taxability (on the time of credit score rating) Taxable as Profit in lieu of Salary u/s 17(3) on the time of terminationIt is pertinent to note that an combination larger prohibit of Rs. 7.5 lakhs could possibly be related in respect of employer’s contribution in a 12 months to NPS, superannuation fund and acknowledged provident fund of the employee and any further contribution could possibly be taxable. Any contribution in further of the brink prohibit of Rs. 7.5 lakhs could possibly be taxable as perquisite u/s 17(2)(ia) r.w. Rule 3B of the Income Tax Rules.
Pratik Vaidya MD, and CVO, Karma Global

Provident funds are among the widespread funding selections in India, offering financial security and stability ultimately. There are three principal kinds of provident funds in India, particularly the Employees Provident Fund (EPF), Voluntary Provident Fund (VPF), and Personal Provident Fund (PPF). In this textual content, we’ll consider these three schemes that may help you understand which one is most interesting for you.

Eligibility: EPF is compulsory for staff working in organizations registered beneath the EPFO (Employees’ Provident Fund Organisation, established by means of the Employees’ Provident Fund and Miscellaneous Provisions Act 1952), whereas every VPF and PPF are open to all folks, along with non-salaried staff and other people from the unorganized sector.

Contribution: EPF mandates a contribution of each 12% of an employee’s Basic + Dearness Allowance and the employer may be obligation to pay an equal % of contribution, whereas every VPF and PPF contributions are voluntary. Only salaried folks can be a part of VPF, whereas every salaried and non-salaried folks can contribute to PPF.

Tax Benefits and Returns: Tax Benefits have been given to all three schemes beneath Section 80C of the Income Tax Act. However,10% TDS is deducted on EPF Balance whether or not it’s withdrawn sooner than completion of 5 years of service if the amount is above Rs. 50000/-, Whereas relating to Returns, every EPF and VPF provide the an identical worth of curiosity, which is in the intervening time 8.15% yearly. Whereas PPF affords a barely elevated charge of curiosity of seven.1% yearly, compounded yearly.

Withdrawal: EPF affords partial and full withdrawal selections, matter to certain conditions akin to when the employee stays unemployed for 2 months. VPF permits for full withdrawal nevertheless solely after completion of 5 years and it is taxable if withdrawn sooner than the lock-in interval, whereas PPF has a lock-in interval of 15 years, after which partial withdrawals are permitted.

Pros and Cons: EPF affords a assured worth of return and is risk-free, making it a superb funding instrument for retirement planning, given that contribution proportion is mounted and it is mandatorily payable by every the employee and the employer. While VPF affords associated revenue with the additional benefit of a greater contribution amount, nevertheless it is solely open to salaried folks and the employer should not be liable to contribute an equal amount. Whereas, PPF affords a greater worth of curiosity and is open to all folks, nevertheless it has an prolonged lock-in interval, restricted withdrawal selections and no involvement of the employer.

Therefore, choosing the right provident fund scheme depends upon your explicit individual financial targets and circumstances. If you are a salaried explicit individual looking out for a risk-free funding instrument, EPF and VPF are good selections. But when you’re a self-employed or non-salaried explicit individual, PPF is an efficient various, provided that you simply’re cosy with the prolonged lock-in interval. Ultimately, each scheme has its private professionals and cons, and it is important to weigh these parts sooner than making a alternative.

Suman Bannerjee, CIO, Hedonova

The various between EPF, VPF, and PPF depends upon your explicit individual financial targets, hazard urge for meals, and preferences. Here are some key parts to ponder:

EPF: EPF is a obligatory retirement monetary financial savings scheme, and every the employee and employer contribute to it. It affords tax benefits and tax-free curiosity earnings. EPF is suitable for individuals who’re employed and looking out for a retirement-focused monetary financial savings risk. However, the contribution amount is mounted and determined by the employee’s wage building.

VPF: VPF is an extension of EPF, allowing staff to voluntarily contribute a greater amount to their EPF account. The tax remedy and withdrawal tips for VPF are the an identical as EPF. VPF is beneficial for individuals who want to enhance their retirement monetary financial savings previous the mandated EPF contribution.

PPF: PPF is a long-term monetary financial savings scheme accessible to every staff and self-employed folks. It affords tax deductions on contributions, tax-free curiosity earnings, and tax-free maturity amount. PPF has a lock-in interval of 15 years, nevertheless partial withdrawals and loans are allowed after a selected interval. PPF is suitable for folks looking out for long-term monetary financial savings with flexibility for partial withdrawals.

In summary, when you’re an employee, EPF is compulsory, and you might bear in mind VPF when you want to contribute further funds to your EPF account. PPF is a separate scheme accessible to every staff and self-employed folks, providing long-term monetary financial savings with tax benefits.

Ashish Misra, chief working officer – retail banking at Fincare SFB

EPF, VPF, and PPF are all tax-saving funding selections. EPF is an employee contribution-based retirement monetary financial savings scheme, whereas VPF is a voluntary contribution to the EPF by the employee. PPF is a public provident fund for folks. While PPF withdrawals are tax-free, EPF and VPF withdrawals are taxed if made sooner than 5 years of regular service. PPF withdrawals have a 15-year lock-in interval, whereas EPF and VPF withdrawals are tax-free after 5 years of regular service. 

In phrases of taxation, EPF and VPF contributions are eligible for tax deduction beneath Section 80C, whereas PPF contributions are completely tax-deductible. However, curiosity earned on EPF and PPF is tax-free, whereas VPF curiosity is taxable. In conclusion, PPF is a suitable various for long-term tax-saving and wealth growth, whereas EPF and VPF are acceptable for long-term retirement monetary financial savings. Before choosing the acceptable automotive, one should fastidiously weigh the funding horizon because of withdrawal and tax implications differ between the three.

Rahul Jain, President & Head, Nuvama WealthTaxpotential of curiosity

For all wise features, the EPF and VPF are the an identical. VPF permits funding over and above the compulsory contribution beneath the EPF. As of now, curiosity on an employee’s contribution to EPF and VPF is tax-free for contributions made as a lot as ₹2.5 lakh every financial 12 months. The prohibit is ₹5 lakh for presidency staff. Interest on employee contributions (along with VPF) of larger than ₹2.50 lakh will in all probability be taxable as earnings from completely different sources. Interest on contributions made by an employer is exempt. PPF – curiosity paid by PPF is exempt from tax.


Total withdrawal from EPF/VPF could also be made solely after the age of 58 years. Partial withdrawal is allowed sooner than 58 years for features akin to marriage, medical payments, residence constructing, and education. As per the revised tips, withdrawals to the tune of 75% could also be accomplished in case of 1 month of unemployment. Withdrawal made sooner than the completion of a minimal of 5 years from the date of the first contribution will in all probability be taxable. The interval of 5 years comprises the tenure with the sooner employer. Withdrawals made after 5 years are exempt from tax. PPF permits the withdrawal of funds after 6 years from the account opening date, and the withdrawal amount is proscribed to 50% of the general accessible steadiness on the end of the fourth 12 months from the date of account opening.

Saakar Yadav, Director & Founder,

EPF stands for Employee Provident Fund, VPF for Voluntary Provident Fund and PPF for Public Provident Fund.

Employee Provident Fund (EPF), and Voluntary Provident Fund (VPF) are only for salaried Individuals whereas Public Provident Fund (PPF) is on the market for every Salaried and Non- Salaried Individuals.

EPF is contributed by employers and staff, whereas for VPF, the contributor proper right here is barely the workers. However, PPF could also be contributed by anybody.

As for the amount that could be contributed, for EPF – the utmost amount is 12% of Basic Salary plus Dearness Allowance, For VPF, it is the amount as a lot as elementary wage plus dearness allowance, nonetheless, in regard to PPF there is a decrease off for ₹1,50,000.

Similarly, the deductions accessible for EPF, VPF & PPF hold commonplace that is as a lot as ₹1,50,000 u/s 80C.

In regard to the Taxation on maturity, EPF & VPF are associated the place the withdrawals are tax-free if the employee has achieved 5 years of regular service. While for PPF, withdrawals are completely tax-free.

In phrases of taxation on pre-withdrawals, a portion of employee contribution is taxable if the employee has claimed deduction u/s 80C on the time of contribution and the Interest on employee Contribution is completely taxable for every EPF and VPF. However, beneath EPF, the employer contribution & Interest it’s very taxable. On the other, beneath PPF, persons are completely exempted from taxation on pre-withdrawals.

Anurag Ok, COO, Omkara Beverages & Hospitality Pvt Ltd

Employee Provident Fund (EPF), Voluntary Provident Fund (VPF) & Public Provident Fund (PPF) are all debt funding selections. These carry low-risk profile whereas offering regular returns over long-term. Hence, these are the most effective autos to keep away from losing for the long-term goal or assemble a retirement corpus.

EPF & VPF is on the market solely to the Salaried class whereas PPF is on the market to every Salaried & non-salaried folks. Salaried staff who’re already contributing to the EPF scheme nevertheless must make investments further can thus choose to contribute between VPF or PPF.

Duration: Investment interval forPPF is 15 years whereas EPF/VPF stays energetic until the time the investor retires or resigns.

Rate of Return: The Rate of Return is elevated for EPF/VPF than PPF. The currentPPF curiosity rateis at 7.1% whereas that of EPF/VPF is at 8.1%. These expenses are revised from time to time.

The various between VPF & PPF thus depends upon an individual alternative over funding horizon Vs worth of return. If the financial goal of the investor is inside 15 years, akin to baby’s elevated education or marriage, PPF is a larger instrument for funding. However, if an investor must earn elevated returns, EPF/VPF is the upper various.

Taxation: EPF & PPF are every eligible for tax deductions beneath Section 80C as a lot as a most of ₹1.5 lacs per 12 months. Interest earned from PPF are tax-free. However, proceeds from EPF/VPF are tax-free nevertheless supplied that the employee has labored for the employer for on the very least 5 years or if withdrawn at maturity. Any withdrawal sooner than ending 5 years is taxable.

To conclude, EPF, VPF and PPF are all fantastic tax-saving selections. They are backed by the sovereign ensures and provide a gentle worth of return on the investments, nonetheless, there are some parts making each applicable for a selected investor.

Karan Aggarwal, Chief Investment Officer, Elever

With Exempt-Exempt-Exempt standing, VPF, EPF, and PPF come all through as tax-efficient funding autos that current safe, assured inflation-beating returns throughout the range of seven%-9

Having acknowledged that, close to withdrawal, VPF scores over EPF and PPF. While PPF is supposed to mature after 15 years, EPF corpus is eligible for tax-free withdrawal after retirement. Pre-mature withdrawals are allowed nevertheless they’re matter to quite a few restrictions and penalties.

On the other hand, VPF (employee contribution to PF above compulsory EPF contribution equal to 12% of elementary wage + DA) could also be withdrawn with none penalties and restrictions after 5 years. 

However, it should be well-known that with changes made throughout the funds for FY 2021-22, curiosity on annual employee contributions in PF (sum of EPF and VPF contribution) above 2.5 Lakhs could possibly be taxable as per slab.

Somya Srivastava, CEO of Prayatna Microfinance

The assorted distinctions between EPF, VPF, and PPF should be understood in an effort to do financial planning. The taxes and withdrawal procedures had been made clear by Prayatna Micro Finance. In case you forgot, PPF affords tax-free contributions, earnings, and withdrawals. 

While VPF permits for added voluntary contributions nevertheless is matter to the an identical tax legal guidelines as EPF, PPF has a 15-year maturity interval and affords people a powerful strategy of long-term monetary financial savings and tax-efficient asset growth. 

Employee Provident Fund, or EPF, is a required monetary financial savings program for salaried workers that provides tax deductions for contributions and tax-exempt withdrawals beneath certain circumstances. Choose accurately, and you might empower your financial journey.


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