EPF vs SIP vs PPF Calculator: Employees’ Provident Fund (EPF), mutual fund systematic investment plan (SIP) and Public Provident Fund (PPF) are some of the popular ways to build a retirement corpus.
While PPF and EPF offer fixed interest rates and significant tax benefits, SIP is a market-linked investment option that can offer comparatively higher returns than EPF and PPF.
Know more about all 3 investment options and how a monthly investment of Rs 12,000 can work for all 3 schemes.
EPF
Employees in the private sector invest in EPF, which offers an interest rate of 8.25 percent.
Employees with a minimum basic salary of Rs 15,000 are eligible to invest in this scheme.
The minimum monthly contribution of an employee to EPF is Rs 1,800, while the maximum amount is 12 per cent of basic salary and dearness allowance (DA).
Another benefit is that the employer also deposits an equal amount into the employee’s account.
Of the employer’s money, 3.67% goes to the employee’s EPF account, while 8.33% goes to the Employees’ Pension Scheme (EPS).
The employee receives a monthly pension from the EPS contribution.
An investment of up to Rs 1.50 lakh in a financial year provides tax benefits to an employee under Section 80C of the Income Tax Act, 1961.
Interest earned and capital gains are tax-free.
The PPF
The program, run by the post office and banks, offers voluntary contributions to account holders.
The Post Office offers an interest rate of 7.1 percent compounded annually.
The minimum investment is Rs 500, while the maximum is Rs 1.50 lakh in a financial year.
It has a lock-in period of 15 years.
After that time, one can take a 5-year extension of unlimited blocks with or without a donation.
As in EPF, investments in PPF up to Rs 1.50 lakh in a financial year provide tax benefits under Section 80C of the Income Tax Act.
Interest earned and maturity are also tax free.
SIP
SIP is a way of investing in mutual funds.
It allows one to invest the initial amount daily, monthly, quarterly, or annually in a mutual fund scheme.
One can increase, decrease, or stop SIP.
Minimum investment amount in SIP is Rs 100.
Most mutual funds offer Rs 500 SIP. One can also choose to increase the SIP, where he can increase the amount of SIP from time to time.
SIP investors in equity funds do not need to time the market as it provides rupee cost averaging.
EPF: Retirement corpus on investment of Rs 12,000 for 30 years
The money invested in 30 years will be Rs 43,20,000, and the estimated retirement money will be Rs 1,84,89,110.47.
PPF: Retirement corpus invested Rs 12,000 for 30 years
For a monthly contribution of Rs 12,000, the retirement corpus in 30 years will be Rs 1,48,32,874.
SIP investment conditions
Since there is no fixed return on SIP investments, we calculate an annual return of 8 percent (debt fund), 10 percent (mixed fund) and 12 percent (equity fund)
SIP: Retirement corpus on Rs 12,000 investment for 30 years (equity fund)
At 12 percent annual growth, the estimated corpus over 30 years would be Rs 3,69,71,679.
SIP: Retirement corpus on Rs 12,000 investment for 30 years (pooled fund)
At 10 percent compound annual growth, the average amount over 30 years would be Rs 2,49,51,513.
SIP: Society for retirement on investment of Rs 12,000 for 30 years (debt fund)
At 12 percent annual growth, the estimated corpus in 30 years will be Rs 1,70,11,359.