Difference between EPF, PPF & NPS and tax benefits around IT Employee Provident Fund

The scheme was initiated under the Employee's Provident Fund and Miscellaneous Act, 1952, for the benefit of an employee after his retirement. The scheme was a collection of funds by the employer and employee.

FEATURE OF THE SCHEME

• Under this scheme, the employer and employee both contribute 12% of the employee's salary and dearness allowance to the employee's provident fund account every month.
• The employee contributes a total of 12% of his Employee Provident Fund Account whereas the employer contributes 8.33% to the Employee's pension scheme and the remaining which is 3.67% to the Employee provident Fund Account.
• Important point is that the employee can only open one account during his lifetime, in case of changing in job the previous employer should transfer the amount to new employer.

WHAT ARE THE BENEFITS OF THE SCHEME?

1. The scheme provides a benefit to employee by saving his part of the salary on monthly basis.
2. The interest rate under this scheme is fixed by the Employee provident Fund Office, current rate under Employee Provident Fund is 8.5% p.a.
3. The amount which is to be received by the employee and interest accrued on the amount which is to be collected is tax free.
4. In case of death of the account holder, the nominee or legal heirs can withdraw the amount from such

PUBLIC PROVIDENT FUND

This scheme is launched by the government of India, as launched by the government it is consider as the safest investment.

FEATURES OF THE SCHEME

• Any person who is citizen of India can invest in Public Provident Fund by opening a account at any post office, nationalized bank or any major private bank.
• The individual who opened an account under this scheme can withdraw the partial amount after the completion of 5 years.

BENEFITS UNDER THE SCHEME

1. Under this scheme the rate of interest is decided on a quarterly basis individually, the current rate of interest i.e. for FY 2021-2022 is 7.1%.
2. The investment made under this scheme is totally risk free, as the interest is paid by the government.
3. Investment under Public Provident Fund offers a deduction of Rs. 1.5 lakh under Section 80C in a financial year.
4. The investor can also take loan against the amount deposited under this account after the expiry of 3^rd year to 6^th

NATIONAL PENSION SYSTEM

National Pension System which was earlier known as National Pension Scheme, the objective for investment under this scheme is the contribution made by the subscriber can further invest into different market linked instruments such as equities and debts.

FEATURES OF THE SCHEME

• Pension Fund Regulatory Authority of India is a regulatory authority for National Pension System.
• The eligibility for investing under this scheme is any Indian Citizen between the ages of 18 to 60 years can invest.
• The investment made under National Pension System will be further invested into 4 different classes such as equities, corporate bonds, government bonds and alternative assets.

BENEFITS UNDER NATIONAL PENSION SYSTEM SCHEME

1. The investor can partially withdraw the amount from the account opened under this scheme after the expiry of 3 years.
2. The investor can also claim the tax benefit of Rs. 1.5 lakh under Section 80C of the Income Tax Act.

Benefits of NPS Account

i) Low Cost: NPS is considered t​o be the world's lowest cost pension scheme. Administrative charges and fund management fee are also lowest.​

ii) Simple: All applicant has to do is to open an account with any one of the POPs being run through all Head Posts Offices across india and get a Permanent Retirement Account Number(PRAN)

iii) Flexible: Applicant can choose his/her own investment option and Pension Fund or select Auto choice to get better returns.

​iv) Portable: Applicant can operate an account from anywhere in the country and can pay contributions through any of the POP-SPs irrespective of the POP-SP branch with whom the applicant is registered, even if he/she changes his/her city, job etc. and also make contributio​n through eNPS. The accou​nt can be shifted to any other sector like Government Sector, Corporate Model in case the subscriber gets the employment

Authored by Adv Shivam Kumar