EPF, PPF, and superannuation
In this chapter: Contribution rules, withdrawal triggers · Tax treatment and the EEE regime
EPF (Employees' Provident Fund): mandatory 12% employee + 12% employer for formal-sector firms with 20+ employees. PPF (Public Provident Fund): voluntary, ₹1.5 lakh/year cap, 15-year tenure. Superannuation: optional employer-funded scheme. All three follow EEE (Exempt-Exempt-Exempt) tax regime — contribution exempt, growth exempt, withdrawal exempt.
EPF: 12% employee contribution (mandatory if salary basic > threshold), 12% employer (split: 3.67% to EPF, 8.33% to EPS up to specified salary cap, rest to EPF). EPF interest credited annually (8.15% for FY 2023-24). Withdrawal: full at retirement (60), partial at specified events (medical, marriage, education, home, unemployment). EPS gives a small monthly pension after retirement (capped at ₹7500/month historically; pending higher-pension cases evolving). PPF: 7-7.5% rate (revised quarterly), 15-year tenure with 5-year extensions. Withdrawals: 50% from year 7, full at maturity. Tax-free at every stage. Superannuation: employer-funded, vesting rules vary.
VPF (Voluntary Provident Fund) is the best risk-adjusted return for salaried Indians. VPF interest above ₹2.5L per year is taxable (post-2021), but for most contributors the threshold is below this. EPF/VPF combined gives 8%+ tax-free — better than any debt mutual fund net of taxes. A typical strategy: 12% mandatory EPF + VPF up to ₹2.5L threshold + PPF ₹1.5L = comprehensive tax-advantaged debt allocation. Beyond that, equity SIPs in mutual funds for the rest.