EPF V/S PPF V/S VPF: Which One is Better?

There is a significant increase in understanding the importance of retirement planning amongst the young and working professionals. However, with a diverse range of investment options available, the whole selection criteria can get very confusing. For investors having a lower risk profile, provident fund schemes like EPF, PPF and VPF can be a great option.  Let us understand each of these schemes in detail.

What is the meaning of EPF, PPF and VPF?

1. Employee Provident Fund or EPF

It is compulsory for all the companies having more than 20 employees to abide by the government's EPF schemes. According to it, the employer and the employees need to take aside a part of their monthly salaries and contribute into the EPF account.

2. Public Provident Fund or PPF

This scheme is not associated with your employer. It’s a government scheme which provides a fixed return and is primarily focused towards assisting individuals in building a retirement portfolio. Non salaried as well as salaried individuals can invest their money in this scheme.

3. Voluntary provident Fund or VPF

It is a scheme that is voluntary in nature and permits the employees to voluntarily contribute to their Provident fund account after contributing 12% according to their EPF guideline.

Which One to Choose - EPF, PPF or VPF ?

You can study the following parameters to make it easier for you to choose an option: 

• Applicability

  Only individuals who are working professionals and receiving a salary are allowed to open EPF and VPF. However, a PPF account can be opened by anyone. Also, most of the post offices and banks offer PPF facilities.

• Returns

  The existing interest rate provided by the banks for PPF is 8%. The interest rates change regularly as interest earned on PPF investment is associated with 10 year government bond yields. The EPF and VPF interest rates are quite similar and presently offer 8.55%.

• Investment Duration

  For a PPF, the duration for investment is 15 years. Once you complete the entire tenure, you can get it extended in a 5 year block. For VPF and EPF, the account stays active till the time you resign or retire.

• Tax Benefit

  The interest that you receive from your PPF investment is free from tax. Moreover, the proceeds after VPF and EPF maturity are tax free, however, only in the case, wherein the employee has worked in an organization for 5 years or more.

Take Away

In case, you are a salaried person at a company having more than 20 plus employees, it will become necessary for you to invest in EPF.  However, in the scenario, wherein you want to increase your retirement portfolio, you must definitely consider PPF and VPF. 

Also Read: EPFs V/S Retirement Insurance Plans

National Pension Scheme (NPS) Quick Guide

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.