(Provident Fund Schemes)

Employee Provident Fund(EPF) and Public Provident Fund (PPF)

EPF  is managed by EPFO (Employee’s Provident Fund Organisation), while PPF is managed by NSI (National savings Institiute). Provident fund is a popular investment option as it offers tax free returns with tax exemption under section 80C.

 EPF INDIA (Employee Provident Fund)

Contribution to this scheme is divided into two parts


1.Employee Contribution (EE share): Salaried individual has to contribute 12% of his basic pay (basic salary + Dearness allowance). Contribution is compulsory for individuals earning monthly basic salary up to Rs 15000/-(earlier limit was Rs 6500/-). It is not compulsory for individuals earning above Rs 15000/-, one can make a voluntary contribution to EPF.


Individuals who are already contributing to EPF and their basic salary is now above Rs15000, do not have option to stop contribution.


Individuals can pay higher percentage of their basic salary as contribution to EPF but employer is not obliged to contribute the same percentage. Contribution greater than specified 12% limit is called voluntary provident fund.


2.Employer’s contribution(ER share): It is compulsory for employer to contribute, irrespective of whether employee opts to contribute to EPF. While employee contribution(EE share) goes entirely into EPF, employers contribution is divided into


  • EPS (Employee pension fund): 8.33% of basic salary is contributed EPS scheme. Maximum basic salary considered for this calculation is Rs 15000, irrespective of actual salary.

      Example: If your basic salary is Rs 15000, then your contribution to EPS will be =15000 *8.33/100=1250

     If your basic salary is Rs 30000, even then only Rs 15000 will be considered for calculation. Thus contribution to EPS is                  capped at Rs 1250.


  • EDLI (Employee deposit linked insurance scheme): 0.5% of basic salary is contributed EDLI scheme. Similar to EPS the maximum basic salary for calculation is capped at Rs 15000. Thus maximum contribution possible to this scheme is Rs 75 (15000*0.5/100).


  • EPF contribution: This amount is equal to Employee contribution (EE share) minus contribution to EPS scheme.


  • Administrative charges: 0.85% and 0.01% of basic salary is charged as administrative charge for EPF and EDLI respectively.


PPF INDIA (Public Provident Fund)

Individuals can contribute voluntary to this fund by opening a PPF account in bank or post office. Minimum and maximum investment of Rs 500 and Rs 1, 50,000 can be made in a financial year. Minimum contribution of Rs 500 needs to be made per year to avoid penalty of Rs 50 per year.


Only one PPF account is allowed per individual except an account that is opened on behalf of a minor. The deposit in a minor account is clubbed with the deposit of the account of the Guardian for the limit of Rs.1, 50,000/-.

Account is transferable from one Post office to another and from Post office to Bank and from Bank to Post office. Account is transferable from one Bank to another bank as well as within the bank to any branch

Interest rate on EPF / PPF

Interest rate on EPF and PPF is notified by government of India (GOI) for every financial year. Interest rate is notified by the Central Government in official gazette from time to time.


EPF rate for FY 2016-2017  is currently notified at 8.65 % p.a.


PPF rate is currently 7.6 % p.a. (Jan-March 2018)

PPF rate will be  linked to yields on government bonds of comparable tenure and reset every quater.

As EPF interest rate is more than PPF,it makes more sense to voluntarily increase your EPF contribution.

Tax Exemption on EPF / PPF

EPF and PPF contributions up to Rs 1, 50,000 qualify for tax exemption under section 80(C) of Income Tax act.

Maturity/withdrawal rules for EPF / PPF


  • EPF account matures on reaching 57 years or on termination of employment.Earlier age limit was 55 years.

  • EPF account can be transferred from one employer to another.   

  • EPF account allows withdrawal under special cases buying a house,treatment of certain diseases,marriage,education,repair of house etc.



PPF account matures at the end of 15 years and can be extended for block of 5 years by applying for the same within one year from the date of maturity.

  • Premature closure is only possible in case of death.

  • Full withdrawal is not allowed but partial withdrawal is allowed after 7th year. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

  • The account holder can retain the account after maturity for any period without making any further deposits and will continue to earn interest. One withdrawal in each financial year is allowed in such account held beyond 15 years subject to a ceiling of 60% of the balance at the end of the 15 year term.

Loan on PPF savings

The facility of loan against the PPF deposits is available from 4th to 6th year of deposit to the extent of 25 % of the amount deposited as at the end of the last financial year. The loan is repayable in 36 months.


No TDS on EPF is applicable in below listed cases

  • PF Balance is transfered  one account to another .

  • On termination of service due to Ill health of member /discontinuation of Business by employer/completion of project/other cause beyond the control of member.

  • If employee withdraws from PF account after a period of five year.

  • If PF payment is less than Rs. 30,000/- but the member has rendered service of less than 5 years.

  • If employee withdraws amount more than or equal to Rs. 30,000/-, with service less than 5 years but submits Form 15G/15H along with their PAN


TDS will be deducted in respect of the following cases:


 If employee withdraws amount more than or equal to Rs. 30000/-, with service less than 5 years, then

a) TDS will be deducted @ 10% if Form-15G/15H is not submitted provided PAN is submitted.

b) TDS will be deducted @ maximum marginal rate (i:e. 34.608%) if employee fails to submit PAN.