EPF vs PPF: Difference in Interest, Tax Benefits, and Withdrawal Rules
Choosing between EPF and PPF is not just about interest rates; it is about access to your money, tax treatment, and long-term flexibility. While EPF is tied to your job and salary, PPF works as a voluntary, long-term savings tool for anyone. This guide breaks down EPF vs PPF in simple terms, covering taxation, withdrawal rules, and which option is safer for different types of investors.
EPF vs PPF – Meaning
EPF and PPF are both government-backed savings schemes that offer safety and tax benefits. However, they differ in who can invest, how much return they offer, and how easily you can withdraw your money.
As of December 2025, EPF offers a higher interest rate of 8.25 percent, while PPF offers 7.1 percent.
What is PPF?
PPF full form is Public Provident Fund. It is a long-term, government-backed savings and investment scheme in India. PPF has been designed to encourage disciplined savings and help individuals build a secure retirement corpus with guaranteed returns and high safety.
PPF is popular because it follows the Exempt Exempt Exempt tax structure, which means the amount invested, the interest earned, and the maturity proceeds are all tax-free.
What is EPF?
The Employees’ Provident Fund, commonly known as EPF, is a mandatory, government-backed savings scheme managed by the Employees’ Provident Fund Organisation of India. It acts as a social security system for salaried employees, helping them build a retirement corpus through regular contributions from both the employee and the employer.
EPF provides a lump sum amount at retirement or exit from employment and also supports pension benefits through the Employees’ Pension Scheme.
What is the Difference Between EPF and PPF?
EPF vs PPF: Which is better for tax saving and long-term wealth?
Let us see!
| Basis | EPF | PPF |
| Interest Rate | 8.25 percent for FY 2024–25, calculated monthly and credited annually | 7.1 percent, compounded annually |
| Eligibility | Salaried employees with mandatory contribution | Any resident individual on a voluntary basis |
| Annual Investment Limit | No fixed upper limit including employer contribution | Maximum ₹1.5 lakh per year |
| Tenure and Lock in | Linked to employment, tax free after five continuous years | Fifteen years, extendable in blocks of five years |
| Tax Benefits | EEE if held over five years, interest taxable above ₹2.5 lakh per year | Fully EEE on investment, interest, and maturity |
| Withdrawals | More flexible rules for housing, emergencies, and unemployment | Partial withdrawal after seven years, premature closure after five years with penalty |
| Liquidity | Higher due to relaxed withdrawal rules | Lower due to long lock in period |
EPF vs PPF – Taxation
Both EPF and PPF promise tax savings, but the way they are taxed can quietly change your final return.
PPF Taxation
As of December 2025, Public Provident Fund (PPF) continues to follow the EEE tax structure, with no changes announced by the government.
- Investment tax benefit
You can invest up to ₹1.5 lakh per financial year in PPF and claim this amount as a deduction under Section 80C of the Income Tax Act under the old tax regime.
- Interest exemption
Interest earned on PPF is 100 percent tax free under Section 10(11). The current interest rate is 7.1 percent, compounded annually for the fourth quarter of 2025.
- Maturity proceeds
The full PPF balance received after 15 years is completely tax free. Partial withdrawals and permitted premature closures also retain tax exemption, although closing the account before 5 years may lead to taxation in certain cases.
EPF Taxation Rules
EPF taxation depends on service duration and annual contribution levels. The basic tax rules remain unchanged as of December 2025.
- EPF Withdrawal Taxation
EPF withdrawals are tax free after 5 years of continuous service. Withdrawals made before completing five years are taxed as per the individual’s income slab.
- If the withdrawal amount is above ₹50,000, 10 percent TDS is deducted when PAN is submitted.
- If PAN is not provided, 20 percent TDS is applicable.
- Form 15G or Form 15H can be submitted to avoid TDS if total income is below the taxable limit.
- EPF Interest Taxation
Interest on employee contributions above ₹2.5 lakh per year, including Voluntary Provident Fund, is taxable. If taxable interest exceeds ₹5,000, 10 percent TDS is applied for resident individuals.
Interest on employer contributions remains tax free up to ₹7.5 lakh per year, considering the combined limit across EPF, NPS, and superannuation funds.
- EPF Taxation Under Old and New Tax Regimes
Under the old tax regime, employee EPF contributions qualify for deduction under Section 80C, up to ₹1.5 lakh per year.
Under the new tax regime, employee contributions do not get Section 80C benefits. However, employer contributions up to 12 percent of salary, along with related interest, remain tax exempt within the prescribed limits.
Want to understand how PF is deducted from your salary every month? Read our guide on what is PF in salary and how it affects your tax planning.
EPF vs PPF Withdrawal Rules: When Can You Take Your Money Out Without Losing Returns?
Both EPF and PPF lock your money for the long term, but their withdrawal rules work very differently.
Public Provident Fund (PPF) Withdrawal Rules
PPF has a 15-year lock-in period.
Partial withdrawal
Partial withdrawal is allowed from the 7th financial year after completing six years. You can withdraw up to 50 percent of the balance available at the end of the fourth year preceding the withdrawal year or the previous year, whichever is lower. Only one partial withdrawal per year is allowed.
Premature closure
PPF can be closed early only after five financial years for specific reasons such as medical treatment, higher education, or change in residency status. A 1 percent penalty on interest is applied for the entire period.
Maturity withdrawal
The full amount can be withdrawn after 15 years and is completely tax free. The account can also be extended in blocks of five years, with or without further contributions.
Employees’ Provident Fund (EPF) Withdrawal Rules
Recent rule changes have made withdrawals more flexible.
- Partial withdrawal (advance)
Partial withdrawals are allowed for specific needs without repayment.
- Medical emergencies: No minimum service period. Withdrawal up to six months of basic salary plus DA or employee contribution, whichever is lower.
- Home purchase, construction, or renovation: Minimum five years of service for purchase or construction, and three years for home loan repayment.
- Marriage or education: Minimum seven years of service. Up to fifty percent of employee contribution can be withdrawn.
Under updated rules, withdrawals are grouped into essential needs, housing needs, and special circumstances, usually requiring twelve months of service.
- Full withdrawal (final settlement)
Full EPF withdrawal is allowed on retirement at 58 years, permanent disability, voluntary retirement, or migration abroad. In case of unemployment, 75 percent can be withdrawn after one month, and the remaining balance after extended unemployment as per latest rules.
- Taxation on EPF withdrawal
EPF withdrawals are tax free after five years of continuous service. Withdrawals before five years are taxable and may attract TDS, depending on PAN availability and conditions.
Which is Safer: PPF or EPF?
Both PPF and EPF are considered very safe because they are backed by the Indian government, so the risk of losing your principal is extremely low in both
PPF is slightly safer because its returns are fully guaranteed and not linked to the market at all. EPF is also highly secure, but a small portion is invested in equities, which adds minimal and controlled market exposure.
In simple terms, both EPF and PPF are among the safest saving options in India, but if you want zero market exposure and complete certainty, PPF feels more predictable. EPF remains a strong and reliable choice for salaried individuals, especially for long term retirement planning.
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EPF vs PPF- FAQs
Yes, EPF maturity is tax-free in December 2025 if the account is held for more than five continuous years. Withdrawals before five years may attract tax and TDS.
EPF is mainly available to salaried employees, limiting access for others. Early withdrawals before five years reduce returns due to taxes and restricted liquidity.
No, PPF does not offer a 12 percent return. As of December 2025, the PPF interest rate is 7.1 percent per year.
PPF has a long fifteen year lock in, which limits liquidity. Returns are also lower compared to market linked investment options.
Yes, PPF is fully tax free under the EEE category. Investment, interest earned, and maturity amount are all exempt from tax.
PPF is better for long term goals due to tax free compounding. Fixed deposits are more suitable for short term needs but interest is taxable.
If you invest ₹1.5 lakh every year at 7.1 percent, the maturity amount after fifteen years is around ₹40.68 lakh. The actual amount may vary with interest rate changes.
PPF, EPF after five years, and Sukanya Samriddhi Yojana are considered fully tax free. They offer tax exemption on investment, interest, and maturity.
