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An increasing number of young working professionals now understand the importance of retirement planning. But with a wide range of investment options currently available, the selection can be confusing. For investors with a low-risk profile, Provident Fund schemes such as EPF, PPF and VPF are excellent options.

These schemes are highly secure and offer stable returns, making them ideal for long-term goals like saving for retirement planning. Understanding the differences between the three can help you pick the best. Let us first have a quick look at what is EPF, VPF and PPF and then check their interest rate, duration, tax benefits, etc.

What are EPF, PPF, and VPF?

EPF or Employee Provident Fund

It is mandatory for any company with 20+ employees to comply with the EPF schemes of the government. As per this scheme, the employer, as well as the employee, are required to contribute some part of the monthly salary of the employee (generally 12%) into the EPF investment account.

PPF or Public Provident Fund

PPF is not related to your employer. It is a government scheme which offers fixed return and is targeted towards helping people build a retirement portfolio. Salaried, as well as non-salaried people, can invest in PPF account.

VPF or Voluntary Provident Fund

What is VPF? As the name suggests, it is a voluntary scheme which allows employees to voluntarily contribute to their PF account after contributing 12% as per the EPF guideline. The interest rate with VPF is similar to EPF and employees can contribute up to 100% of their salary.

Differences Between EPF, PPF, and VPF

1. Applicability

Only salaried working professionals can open EPF and VPF. On the other hand, anyone can open a PPF account. Most banks and all the post offices offer PPF facility. You can also start PPF online by visiting the official website of a bank offering this facility.

2. Contribution

For EPF, the minimum contribution for employee and employer is 12 per cent of the basic pay + dearness allowance of the employee. With VPF, an employee can contribute any amount up to 100% of their salary + dearness allowance. For PPF, the contribution is voluntary and can be up to Rs. 1.5 lakhs in a year.

3. Returns

The current PPF interest rate offered by banks is 8%. As the interest earned on PPF investment is related to 10-year government bond yields, the interest rate changes regularly. The VPF and EPF interest rates are similar and currently offer 8.55%. The EPFO (Employees’ Provident Fund Organization) revises their interest rate every year.

4. Investment Duration

The investment duration for Public Provident Fund or PPF is 15 years. After completion of this duration, you can extend it in 5-year blocks. For EPF and VPF, the account remains active until the time you retire or resign. If you switch job, the account can also be transferred to another employer.

5. Tax Benefits

Returns from your PPF investment are tax-free. Even the proceeds after EPF and VPF maturity are tax-free but only if the employee has worked for the employer for at least five years. Any withdrawal before completing five years is taxable.

6. Loan Facility

One of the biggest advantages of provident fund schemes is their loan facility. With PPF, you can get a loan against your investment. You can take the first loan after three years of investment and get a loan of up to 25% of the balance amount by the end of the 2nd year.

You can also take a second loan before the 6th financial year of your investment is completed. But the second loan can only be taken once you have repaid the first loan. EPF and VPF allow you to apply for loans of up to 100% of your balance amount.

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 certainly consider VPF and PPF. For PPF account online, you can consider any top bank in India as most of them offer this facility.


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EPF vs PPF vs VPF: Which one is better for saving money?
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