PPF has a lock-in period of 15 years, while VPF is linked to employment tenure.
Talking about tax-saving options, people have many schemes to invest their money, reduce taxable income and ultimately save tax. Of all the existing options, only a few come under the EEE scheme. These options save tax not only in the initial stages but also in other stages. Let us understand here, two popular tax-saving investments PPF and VPF. What is the difference between them and which option is better?
what is ppf
PPF i.e. Public Provident Fund is a government-backed savings scheme in India that offers tax benefits and guaranteed returns. It is a popular long-term investment option that can be used for retirement planning, children’s education and housing. There is a lock in of 15 years.
What is VPF?
Voluntary Provident Fund (VPF) is a contribution made by employees which is more than the minimum contribution prescribed by the Employees’ Provident Fund Organization (EPFO). However, the employer will not contribute more than 12% of the basic salary, no matter how much the employee contributes. Many employees opt for VPF as they do not have to make any other investment. This is easy as the investment amount is directly deducted from their salary.
difference between the two
PPF is available to all Indian citizens, whereas VPF is available only to salaried individuals covered under EPF. PPF has a lock-in period of 15 years, while VPF is linked to employment tenure. Similarly, currently 7.1% interest rate is being offered on investment in PPF, while 8.25% interest is being offered in VPF. Tax saving options are available in both. You can invest up to Rs 1.5 lakh annually in PPF. In PPF, partial withdrawal can be made after 7 years, whereas in VPF, partial withdrawal can be made after 5th year. While PPF is risk free, VPF is a low-risk, government-backed EPF scheme.
who is better
The answer to this question here is not easy. Well, if you want stability and guaranteed returns in the long term, then PPF is a great option. The lock-in period, although long, encourages disciplined savings and can act as a reliable fund for retirement or other long-term financial goals. If you are salaried and want higher contributions, want a higher rate of return than PPF, and are willing to contribute a significant portion of your salary towards retirement savings, they can consider VPF.
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