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PPF Vs VPF

Both Public Provident Fund (PPF) and Voluntary Provident Fund (VPF) are popular tax-saving schemes which are covered under Section 80C of the Income Tax Act, 1961. They both held the members to save for their retirement. By investing in these schemes, you can receive assured returns on your savings. Well, before investing in them, it is important for you know how every aspect of these schemes in detail.

What is PPF?

Public Provident Fund (PPF) is a popular tax-saving options which is covered under provisions of Section 80C of the Income Tax Act. Under this scheme, the taxpayers can claim tax deductions of up to Rs. 1,50,000 a year by investing in PPF. The minimum investment required is 500 in a year to keep the account operative. However, there is a restriction that no individual can invest more than Rs. 1.5 lakhs in this scheme. PPF accounts offered assured and fixed returns on investment and are backed by sovereign guarantees.

What is VPF?

Voluntary Provident Fund (VPF) is an extension of the Employees’ Provident Fund (EPF) scheme. Under EPF, the employees working in the eligible organizations are required to contribute up to 12% of their basic salary and the employers will also have to contribute the same amount. The contributions are locked-in until the employee retires. If the employees want to contribute more than the minimum requirement, then they can do so under the Voluntary Provident Fund (VPF) provisions. However, the employer’s contribution will remain the same. The contributions made into the VPF accounts are deposited into the employee’s EPF and it earns the same rate of interest as earned under EPF Scheme. There is no capping on the VPF contributions.

Comparison of VPF with EPF

Parameter	Public Provident Fund	Voluntary Provident Fund
Who can invest	Any Indian Resident, except NRls and HUFs	Any employed individual
Minimum period of investment	15 years	Up to retirement or resignation, whichever is earlier
Employee Contribution on Basic + Dear Allowance	N.A.	Voluntary (Up to 100%)
Employer contribution	N.A.	N.A.
Taxation on maturity returns	None	Tax-Free
Tax deduction	As per Section 80C of the Income Tax Act	As per Section 80C of the Income Tax Act
Extension beyond maturity	Can be extended indefinitely by extending for 5 years each after that	Can transfer account to new company till retirement
Maximum Loan facility	Not Available. However, you can make partial withdrawal is permitted under specific conditions	Available, 50% after 6 years
Rate of interest	Lower (7.1%)	Higher (8.5%)

Where should you invest

Both are saving schemes that offers varied benefits and carries different features. Depending upon various factors such as rate of interest, amount to be invested, tax deduction, returns offered, etc. you can make a wise and informed decision as to which scheme you wish to invest in.