EPF vs PPF vs VPF: Which Is Better to Invest in?

Provident fund schemes such as EPF, PPF, and VPF are perfect options if you plan to maintain a low-risk profile. All three of them provide stable returns and are highly secure. Therefore, these schemes are ideal long-term saving goals for retirement.

However, there are some factors making each suitable for particular investor profiles.

To clarify all confusions, here is a brief overview of each of these schemes, followed by the comparative study of EPF vs VPF vs PPF.

What Is EPF, PPF and VPF?

A Provident Fund is a pension scheme involving a 12% deduction of an employee’s basic salary every month. This amount acts as savings. Further, both the employer and employee contribute a specific percentage to this deduction.

Now, the Provident Fund is classified into 3 categories -

1. Employee Provident Fund (EPF)

Under this scheme, employees must contribute a fraction of their salaries per month mandatorily. Note that a percentage of contribution is also applicable for employers. Further, participation in this scheme is compulsory for organisations with more than 20 employees. The saved amount is eligible for a tax deduction and earns interest. Also, EPF is a risk-free investment option.

2. Voluntary Provident Fund (VPF)

Employees can contribute any percentage of their salaries voluntarily under this scheme to their respective Provident Fund accounts. This contribution must be more than 12%. Now, it can even be 100% of the basic salary and dearness allowance. However, the employer does not need to contribute towards VPF. The interest rate will be the same as EPF, and the entire amount will be credited to EPF accounts.

3. Public Provident Fund (PPF)

PPF is a government-assured fixed income security option for self-employed or non-salaried individuals to structure their retirement portfolios. However, anyone can contribute to a PPF account to receive risk-free and guaranteed returns. Besides earning interest upon the amount you invest, you will also get interest on the interest earned. Also, the accumulated balance is exempt from tax.

Now, before you start your savings journey for retirement, go through the difference between EPF and PPF and VPF to make an informed decision.

What Is the Difference Between EPF, PPF & VPF?

Employee Provident Fund (EPF)	Voluntary Provident Fund (VPF)	Public Provident Fund (PPF)
Eligibility Criteria: Indian salaried and non-salaried employees	Eligibility Criteria: Indian salaried employees	Eligibility Criteria: Anybody except NRIs
Annual Rate of Interest: 8.50%	Annual Rate of Interest: 8.50%	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 ₹ 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: ₹ 500 a year (minimum) ₹ 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

Points to Remember While Choosing to Invest in VPF, EPF and PPF

Apart from the VPF, EPF and PPF difference, you should consider the following points to utilise maximum benefit against your contributions.

For Public Provident Fund contribution, individuals can open a PPF account at bank or post offices.
As the PPF interest rate is linked to 10-year government bond yields, the returns may vary as per the market. In contrast, EPF and VPF interest rates are not linked with government-yield bonds.
If an employee serves an organisation for 5 consecutive years, maturity proceeds from EPF and VPF are tax exempt. One of the significant differences between VPF vs PPF is that returns of the latter are tax-free.

Which Savings Option Is the Best Among EPF, VPF and PPF?

The above stated EPF vs VPF vs PPF pointers offer comprehensive clarity regarding the best investment option to ensure maximum security post-retirement.

While Employee Provident Fund (EPF) is compulsory in India among the three, Voluntary Provident Fund (VPF) seems to be the best investment tool.

VPF extends the highest interest rate and EEE (exempt-exempt-exempt) tax benefits like EPF. Besides, you can be rest assured of guaranteed returns. Individuals looking for long-term investment options involving less risk can opt for this scheme.

However, only salaried employees are eligible to invest in this scheme. In this regard, the Public Provident Fund (PPF) is an attractive option for non-salaried individuals. But it too comes with a limitation. Individuals can only contribute up to ₹ 1.5 lakh in PPF annually.

If you are a salaried employee and earn higher salaries, you can opt for both the schemes as PPF and VPF are fixed income investment tools with tax-free returns.

Nevertheless, in 2021, the Union Budget implemented the latest Provident Fund condition. According to this term, if the investment in VPF and PPF collectively exceed over ₹ 2.5 lakh in a financial year, the returns earned will not be exempted from tax.

Therefore, it is ideal for gaining in-depth clarity regarding EPF vs VPF vs PPF before starting your investment journey for a smooth post-retirement life.

Frequently Asked Questions

✓ How much amount can I withdraw from my EPF account before retirement?

According to the EPFO, employees can only withdraw up to 75% of their corpus before retirement.

✓ If I resign from my job, what will happen to my VPF investment?

If you resign before 5 years, the accumulated amount will be paid to you after tax deduction on your total VPF maturity amount.

✓ Can I carry my PPF investment after 15 years?

Yes, you can continue your PPF investment after a 15 year lock-in period. However, you can extend your PPF investment for 5 years by submitting an application.