5 min read
Updated on Feb 06, 2023
While we spend our hard-earned money on several things that make us happy, it is quite important to invest a part of that money into something that can support us during our post-retirement days. And as we talk about retirement planning, it actually becomes very confusing to choose from the various options that are available in the market. Some of the most common investment plans are Employee Provident Fund (EPF), Public Provident Fund (PPF), Voluntary Provident Fund (VPF), etc. So, let us discuss VPF vs PPF, EPF vs PPF, and VPF vs EPF here. Understanding the difference between these will help us in picking anyone.
|Employee Provident Fund (EPF)||Voluntary Provident Fund (VPF)||Public Provident Fund (PPF)|
|Eligibility Criteria: Indian salaried as well as non-salaried employees||Eligibility Criteria: Indian salaried employees||Eligibility Criteria: Anybody except NRIs|
|Annual Rate of Interest: 8.10%||Annual Rate of Interest: 8.10%||Annual Rate of Interest: 7.1%|
|Minimum Period of Investment: Retirement or resignation||Minimum Period of Investment: 15 years||Minimum Period of Investment: Retirement or resignation|
|Tax Benefit: Up to INR 1 lakh under Section 80C||Tax Benefit: NA||Tax Benefit: Triple exemption benefits- deduction on deposits, tax-free returns, and zero wealth tax|
|Investment Duration: Till retirement or resignation (whichever comes before)||Investment Duration: NA||Investment Duration: 15 years|
|Withdrawal: Complete withdrawals||Withdrawal: Complete withdrawals||Withdrawal: 50% withdrawal after 6 years|
|Contribution Percentage: 12% (both employee and employer)||Contribution Percentage: More than 12% (only employees)||Contribution Percentage: INR 500 a year (minimum) INR 1.5 Lakh (maximum)|
|Taxation on Returns after Maturity: Tax-free||Taxation on Returns after Maturity: No tax||Taxation on Returns after Maturity: Tax-free|
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EPF was introduced under the Employee’s Provident Fund and Miscellaneous Act, 1952. In an EPF, a certain percentage of the salary of the employees and funds from the employers are collected at regular intervals. The accumulated money is then offered at the time of retirement to the employees along with interest.
Features of EPF
Benefits of EPF
Public Provident Fund or PPF is a Government of India-backed scheme for tax-free savings. As it offers fixed returns, it is considered among the safest investment options in India.
Features of PPF
Benefits of PPF
Also Read: Government investment schemes
If the employee wants to contribute a certain amount above their EPF, it is considered a Voluntary Provident Fund.
Features of VPF
Benefits of VPF
Understanding the difference between these savings schemes can help any employee make the most of their savings and earn a high rate of interest. Depending on the features of these schemes and the investors, financial obligations, liquidity, and withdrawal requirements, they can choose the right scheme amongst this three.
Read More: What is the Voluntary Provident Fund (VPF)?
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PPF is generally considered better than VPF as the investor can withdraw the amount in PPF account after the lock-in period of 15 years in comparison to the VPF account which can only be withdrawn after retirement. While the VPF and EPF are both deposited in the EPF account, EPF is a mandatory component of one’s employment while the VPF is a voluntary contribution. Yes, you can withdraw VPF under certain circumstances after 5 years. Yes, withdrawals made from VPF after 5 years are exempted from taxation.
FAQs on EPF vs PPF vs VPF
Is PPF better than VPF?
Are VPF and EPF accounts the same?
Can VPF be withdrawn after 5 years?
Is VPF tax-free?
PPF is generally considered better than VPF as the investor can withdraw the amount in PPF account after the lock-in period of 15 years in comparison to the VPF account which can only be withdrawn after retirement.
While the VPF and EPF are both deposited in the EPF account, EPF is a mandatory component of one’s employment while the VPF is a voluntary contribution.
Yes, you can withdraw VPF under certain circumstances after 5 years.
Yes, withdrawals made from VPF after 5 years are exempted from taxation.
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