Savings plays a critical part in an individual’s financial standing. It bolsters one’s financial footing and creates a stable ground for times when a person is out of income. On that note, it is particularly important to create a substantial corpus for one’s post-retirement life.
Keeping that in perspective, the Indian government has introduced Provident Funds (PFs). In India, there are three types of provident funds, namely – the General Provident Fund (GPF), Employees’ Provident Fund (EPF), and Public Provident Fund (PPF).
Each provident fund that is mentioned above promotes the practice of savings when an individual has a regular source of income. This helps to accumulate sufficient funds that can be used to meet expenses when one is out of income. However, there are also several basic differences between GPF and EPF, and PPF that an individual must duly consider.
Nevertheless, before directly delving into EPF vs GPF or PPF, it is crucial to learn about their characteristics.
The General Provident Fund is a savings-cum retirement scheme, particularly for government employees. Non-government employees cannot contribute to a GPF account. This point functions as a key difference between PPF and GPF.
A government employee who is a member of GPF needs to contribute a portion of their income regularly till such time when he/she is employed. The accumulated corpus can be withdrawn once an individual retires.
The balance in a GPF account is also eligible to earn interest at a fixed rate. The central government revises this rate from time to time. The General Provident Fund Interest Rate for the Financial Year 2024 is set at 7.1%.
As opposed to the General Provident Fund, PPF serves as a savings scheme for anyone willing to lock in their contributions for a prolonged period. However, similar to GPF, the interest rate on Public Provident Fund is revised every quarter by the Government of India.
For the Financial Year 2024, the rate of interest on PPF has been set at 7.1%. Interest calculation under the PPF scheme is based on the lower balance between what is shown at the fifth day’s end in a month and it’s the last day. Therefore, any deposit that is made after the 5th of any month is not included in the interest calculation for that month.
Employees’ Provident Fund is a retirement-cum savings scheme similar to GPF. However, unlike GPF, an EPF is mandatory for those working in an organisation with more than 20 employees.
The balance in an EPF account accrues interest based on the rate set by the Employees’ Provident Fund Organisation. For the current financial year, the interest rate is set at 8.15%. This interest is calculated monthly and transferred to an individual’s EPF account at the end of every year.
The following individuals can open an account under the General Provident Fund scheme –
The following category of individuals can hold an account under the Public Provident Fund –
Moreover, it shall be noted that any individual cannot hold a PPF account jointly. Neither is it allowed for one individual to hold multiple PPF accounts.
EPF has a single criterion, i.e. the employee should belong to an organisation that employs a minimum of 20 individuals.
Government employees eligible for the General Provident Fund need to contribute a minimum of 6% of their salary toward GPF. The maximum amount an individual can contribute equals 100% of his/her income.
Contribution to GPF can only be stopped in the case of suspension or retirement. Such contribution is usually stopped 3 months prior to when an individual is slated to retire, according to the GPF rules.
A PPF account holder can only make a maximum of 12 contributions in a year. An individual needs to make a minimum contribution of Rs.500 per year. However, the maximum amount that an individual can contribute, both for themselves and their minor, cannot exceed Rs.1.5 lakh. The contribution is a primary point of GPF vs EPF.
In the case of EPF, both the employer and employee are required to contribute to such an employee’s EPF account. The standard contribution from both parties is 12% of the employee’s salary (basic + dearness allowance). However, recently the government reduced the EPF contribution to 10% for both employers and employees.
GPF is a tax-free retirement-cum savings scheme. Therefore, the contributions, interest earned on it as well as the returns from a GPF account are exempt from tax calculations under Section 80C.
The deposits made every year toward a PPF account are eligible for tax exemption up to Rs.1.5 lakh under Section 80C of the Income Tax Act. Moreover, the interest earned on the balance amount in a PPF account along with the maturity value is exempt from taxation.
If an individual withdraws the balance amount from his/her EPF account after 5 years of account creation, it is exempt from tax. Moreover, contributions made in an EPF account every year up to Rs.1.5 lakh are eligible for tax exemptions under Section 80C of the Income Tax Act, 1961.
The difference between EPF and GPF as well as PPF are summarised in the table below.
| Parameters | General Provident Fund | Employees’ Provident Fund | Public Provident Fund |
| Eligibility | Government employees | Anyone working in an organisation with more than 20 employees | Any Indian citizen |
| Maturity | Until retirement | Age of 58 years | 15 years from the date of account creation |
| Premature close | On suspension or resignation from government service | When the account holder is unemployed for 2 months or more | Allowed after completion of 5 years of a child’s education or medical reasons |
| Interest Rate | 7.1% | 8.15% | 7.1% |