EPF vs PPF vs VPF: Which one is better for saving money?

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New Delhi | Updated: August 10, 2018 10:08:09 PM

In such a situation, people can go for low-risk products such as the government-run Employee Provident Fund (EPF), Voluntary Provident Fund (VPF) and Personal Provident Fund (PPF).

how to stop buying unnecessary things, how to stop buying useless things, how to save money, how to stop buying things you don't need, budget, cash, delay in purchase, money, EPF provides return rate of 8.65%.

Retirement plans are the most talked-about topics among the people nowadays. With so many investment options available in the market such as National Pension System (NPS), Mutual Funds, Equity etc, it has become difficult for them to decide which one is the best option for them. In such a situation, people can go for low-risk products such as the government-run Employee Provident Fund (EPF), Voluntary Provident Fund (VPF) and Personal Provident Fund (PPF).

What are EPF, VPF and PPF:

Voluntary Provident Fund (VPF): As the name suggests, under the VPF scheme, an employee can voluntarily contribute any percentage of his salary to the PF account. However, a subscriber needs to note that the contribution must be more than 12 percent which is the PF cap. The interest offered would be the same as that of EPF and the amount would be credited to EPF account

Employee Provident Fund (EPF): Under this scheme, both employees and employer contribute to the EPF account. It is compulsory for an employee as well as the employer to contribute 12 percent each to the EPF account. EPF is compulsory for every company in which 20 or more people are employed. Apart from this, an employee with a basic salary of over Rs 6,291 falls under this scheme.

Personal Provident Fund (PPF): It is a government-run fixed income security scheme, and oriented towards providing financial security after retirement to an unorganised sector or the self-employed person. However, it does not stop the salaried person to invest in the same. The interest earned on the PPF subscription is compounded. It means you not only earn interest in the money you put in, but you earn interest on the interest earned too, according to a Policybazaar report. All the balance that accumulates over time is exempt from wealth tax.

Voluntary Provident Fund (VPF)

Personal Provident Fund (PPF)

Employee’s Provident Fund (EPF)

Interest Rate

8.75% p.a

8.75% p.a

8.7% p.a

Tax Benefit

Up to Rs 1 lakh per year

Up to Rs 1 lakh per year

Up to Rs 1 lakh per year

Period of Investment

Up to retirement or resignation (whichever is earlier)

Up to retirement or resignation (whichever is earlier)

15 years

Loan Availability

Partial withdrawals

Partial withdrawals

50% withdrawal after 6 years

Employer Contribution on Basic + DA

12%

NA

NA

Employee Contribution on Basic + DA

12%

Voluntary

NA

Eligibility criteria:

People from the unorganised sector which include non-salaried employees are eligible to open a PPF account at a bank or in post office, however, VPS and EPF schemes can only be availed by salaried individuals. VPF subscribers can contribute any amount over the necessary 12% which will be contributed in the EPF account.

Investment Period:

VPF: The amount is payable at the time of retirement or resignation. The amount can be transferred from one employer to another. After death, the total amount is paid to the spouse or family member.

PPF: Amount can be withdrawn only on maturity, that is, after 15 years of the end of the financial year in which the product gets associated with a person.

Withdrawal facility:
PPF account has to be maintained for a minimum of 15 years. Only partial withdrawal is allowed subject to some terms and conditions. The account can further be extended for another 5 years. However, the money from a VPF account can be fully and conveniently withdrawn. Further, if withdrawal from the VPF account happens prior to completing 5 years of service with the employer, then that amount would be taxed.

Returns:
Currently, PPF account offers an interest rate of 7.6 percent. The interest rate on VPF is the same as that on EPF. EPF has a return rate of 8.65 percent.

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