Talking about tax-saving options, people have several schemes to invest their money, reduce taxable income, and ultimately save tax. Among all the existing options, only a few fall under the EEE (Exempt-Exempt-Exempt) scheme. These options not only save tax at the beginning but also at other stages. Let’s understand two popular tax-saving investments, PPF and VPF. What is the difference between them, and which option is better? Throughout this article, we will share all the details regarding this.

What is PPF?

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PPF, or 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, commonly used for retirement planning, children’s education, and housing. PPF has a lock-in period of 15 years.

What is VPF?

VPF (Voluntary Provident Fund) is a contribution made by employees, above the minimum set by the Employees’ Provident Fund Organisation (EPFO). However, the employer will contribute only up to 12% of the basic salary, regardless of the employee’s contribution. Many employees opt for VPF as the investment is automatically deducted from their salary, making it convenient.

Difference between the two

  1. PPF is available to all Indian citizens, while VPF is available only to salaried individuals covered under EPF.
  2. PPF has a lock-in period of 15 years, while VPF is linked to the individual’s employment tenure.
  3. Currently, PPF offers an interest rate of 7.1%, while VPF offers 8.25% interest.
  4. Tax-saving options are available for both.
  5. You can invest up to Rs 1.5 lakh annually in PPF.
  6. Partial withdrawal from PPF can be done after 7 years, while partial withdrawal from VPF can be done after 5 years.
  7. PPF is risk-free, while VPF is a low-risk, government-backed EPF scheme.

Which is better?

The answer depends on your goals. If you are looking for stability and guaranteed returns in the long term, PPF is a great option. The lock-in period encourages disciplined savings and can act as a reliable fund for retirement or other long-term goals. However, if you are salaried and want to contribute more, earn a higher return than PPF, and are willing to allocate a significant portion of your salary for retirement savings, VPF may be a better option.

Disclaimer:

This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial advisor before making any investment decisions. Times Bull is not responsible for any financial investments made, as it is entirely your responsibility. Please consult a financial advisor for better results.