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PPF
EPF vs PPF vs VPF: Which Investment Is Best for You?
2 mins Read | 1 Month Ago
An increasing number of young working professionals are understanding the importance of retirement planning. But with the wide range of investment options available, selecting one can be confusing. For investors with a low risk appetite, Provident Fund schemes such as EPF, VPF and PPF are excellent options.
These schemes are highly secure and offer stable returns, making them ideal for long-term goals like retirement planning. Understanding the differences between the three can help you pick the one most suited to you. Let us first take a quick look at what EPF, VPF and PPF are and then check their interest rates, duration, tax benefits and other features.
What are EPF, VPF and PPF?
EPF (Employees’ Provident Fund)
Organisations with 20 or more employees mandatorily have to follow the EPF scheme. Under this, both the employer and the employee contribute 12% of the employee’s basic salary (including the dearness allowance) to the employee’s EPF account each month.
VPF (Voluntary Provident Fund)
As the name suggests, it is a voluntary scheme which allows employees to voluntarily contribute to their EPF account over the mandatory 12% contribution as per the EPF guideline. The interest rate of VPF is similar to EPF.
PPF (Public Provident Fund)
PPF stands for Public Provident Fund. It is a long-term savings scheme backed by the Government of India. It allows you to save money securely while earning interest. You can deposit any amount between ₹ 500 and ₹ 1.5 lakh every year and after 15 years, you receive the full amount along with accumulated interest. It also offers tax benefits under Section 80C of the Income Tax Act.
Differences between EPF, VPF and PPF
Parameter | EPF (Employees’ Provident Fund) | PPF (Public Provident Fund) | VPF (Voluntary Provident Fund) |
Type of Scheme | Retirement + savings scheme | Long-term savings scheme | A voluntary top-up to EPF |
Eligibility | Employees of organisations with 20+ staff | All Indian citizens (except NRIs & HUFs) | Employees of organisations with 20+ staff that are registered with EPF |
Tenure | Until retirement or resignation | 15 years from account opening | Same as EPF |
Contribution | 12% of (basic salary + dearness allowance) | Minimum: ₹ 500, maximum: ₹ 1.5 lakh per year | 88% of (basic salary + dearness allowance) |
Withdrawal Rules | On retirement, unemployment (2+ months), house purchase, marriage, medical expenses, repayment of Home Loan etc. | Partial withdrawal is allowed after 5 full financial years, full withdrawal allowed after 15 years | Same as EPF |
Tax Benefits | Contributions, interest and withdrawals are tax-free under certain conditions | E-E-E tax benefits, i.e. contribution, interest and maturity amount are all tax-free | Same as EPF |
Limitations of EPF, VPF and PPF
Though EPF, VPF and PPF are useful retirement and savings tools, each has certain limitations that one should consider before investing.
Scheme | Limitations |
EPF |
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VPF |
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PPF |
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Making the Decision
If you are a salaried employee at a company with 20 employees or more, it'll be compulsory for you to invest in EPF. However, if you want to increase your retirement portfolio, you should consider VPF and PPF as well. For opening a PPF account online, you can consider any leading bank in India as most of them offer this facility.
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