PF vs PPF: What's the difference?
We attempt to clear his doubts.
The employer also contributes an equal amount to the fund.
2. What is the return on this investment?
3. How long is the money blocked?
In case of the death of the employee, the accumulated balance is paid to the legal heir.
The accumulated sum is repayable after 15 years.
The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C.
If you have worked continuously for a period of five years, the withdrawal of PF is not taxed.
The tenure of employment with the new employer is included in computing the total of five years.
If you withdraw it before completion of five years, it is taxed.
But if your employment is terminated due to ill-health, the PF withdrawal is not taxed.
The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C.
On maturity, you pay absolutely no tax.
5. What if you need the money?
If you urgently need the money, you can take a loan on your PF.
In both cases, contributions get a deduction under Section 80C and the interest earned is tax free.
Having said that, PF scores over PPF in two aspects.
The rate of interest on PF is also marginally higher (currently 8.50%) than interest on PPF (8%).
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