Should a person have both EPF and PPF?

Contribution to an Employee Provident Fund Account can only be made by a person who works as an employee of an organization that has an EPF scheme in place, while a Provident Fund Account (PPF ) can be opened by any person, whether salaried or self-employed, who is a resident of India. A PPF account can even be opened in the name of minors and housewives. There is no restriction on an employee with an EPF account also having a PPF account.

Accumulating a good corpus for your retirement is very important because in the age of the nuclear family, even the children leave home to work elsewhere, leaving the parents to fend for themselves. So, investing in both, in my opinion, is absolutely a great strategy because both plans help you build up a good corpus for long-term financial goals, especially for your retirement. Since the interest on both of these schemes is tax-free, it will help you accumulate good funds without having to pay tax on the income earned on these investments year after year.

Tax laws have the restriction of Rs. 2.50 lakhs of annual contribution only up to which interest on your EPF account will be tax free and any interest earned on contribution in excess of 2.50 lakhs each year is fully taxable in your hand, so PPF provides another opportunity to invest an additional Rs. 1.50 lakhs every year to earn tax-free interest. Moreover, both plans offer better returns compared to other risk-free products available in the market. A word of warning. You should invest your money in these two schemes with a long-term horizon in mind, because you cannot withdraw your investments in these products as easily as is the case with other debt products such as schemes. mutual fund debt and bank term deposits.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter