Difference between EPF, PPF & NPS and Tax Benefits

Creating a retirement portfolio after a certain age is essential for salaried individuals to make their future financially secure. To help such people with the same, the Government of India offers two savings schemes viz. National Pension Scheme (NPS) and Public Provident Fund (PPF). Both are long-term savings instruments providing income tax benefits.

Public Provident Fund

This was launched by the Indian government, as introduced by the government is considered a very safe investment.

Features:

Any Indian citizen can invest in the Public Provident Fund by opening an account at any post office, nationally accredited bank or any major private bank.
The person who created the account under this program can withdraw the partial amount after the expiration of 5 years.

Benefits under the Scheme:

Under this program the interest rate is determined on a quarterly basis, the current interest rate i.e. FY 2021-2022 is 7.1%.
Investments made under this scheme are not risky at all, as interest is paid by the government.
Investments under the Public Provident Fund provide a deduction of Rs. 1.5 lakh under Section 80C for the financial year.
An investor may also be able to borrow money deposited under this account after the end of the 3rd to 6th year.

Employee’s Provident Fund

This program was initiated under the Employee’s Provident Fund and Miscellaneous Act, 1952, for the benefit of employee post-retirement. The scheme was a collection of employer and employee funds.

Features:

Under this scheme, both the employer and the employee contribute 12% of the employee’s salary and allowance to the provident fund account on a monthly basis.
An employee contributes 12% of his or her Employee Provident Fund account and the employer contributes 8.33% to the Employee Pension Scheme and the remaining 3.67% to 3.67%.
An important point is that an employee can open only one account during his or her lifetime, in the event of a change of employment the previous employer must transfer the value to the new employer.

Benefits under the scheme:

The plan provides benefits to the employee by saving a portion of his or her monthly salary.
The interest rate under this scheme is adjusted by the Employee provident Fund office, the current rate under the Employee Provident Fund is 8.5% p.a.
Employee income and interest accrual are tax-free.
In the event of the death of the account holder, the nominee or legal heirs may deduct the amount.

National Pension System

National Pension System formerly known as the National Pension Scheme, the purpose of which is to invest under this scheme as a contribution by the subscriber into various market-linked tools such as stocks and bonds.

Features:

The Pension Fund Regulatory Authority of India is the regulatory authority for the National Pension Scheme.
Eligibility for investment under this program is any Indian citizen between the ages of 18 and 60 who can invest.
Investments made under the National Pension System will also be invested in 4 different categories such as equity, corporate bonds, government bonds and other assets.

Benefits under the scheme:

An investor can withdraw part of the money from an account opened under this scheme after the expiration of 3 years.
The investor may also claim a tax benefit of Rs. 1.5 lakh as per Section 80C of the Income Tax Act.

Benefits of NPS Account

Low Cost: – NPS is considered to be the least expensive pension system in the world. Administrative and fund management costs are also very low.
Least complicated:- What the applicant has to do is to open an account with any POPs held at all Post Office Offices throughout India and obtain a Permanent Retirement Account Number (PRAN)
Flexible: – The applicant can choose his own investment method and Pension Fund or choose Auto option for a better return.
Mobile: – The applicant can use the account anywhere in the country and can pay contributions in any of these ways. POP-SP regardless of the POP-SP branch the applicant has registered with, even if it changes its city, occupation etc. and also donates to eNPS. The account can be changed to any other category such as Public Sector, Business Model in case the registrar gets a job.