EMPLOYEE’S PROVIDENT FUND, VOLUNTARY PROVIDENT FUND and PUBLIC PROVIDENT FUND are long-term investment plans for retirement savings because of their features like low risk and tax benefits.
EPF Vs VPF Vs PPF: Which one is better for saving money?
1. EMPLOYEE’S PROVIDENT FUND (EPF) -
Employee’s Provident Fund Account created with a purpose to provide financial security and stability in the future. It can be opened only for salaried employees in India. It is compulsory for every company in which 20 or more people are employed. Under this scheme employees and employer to contribute 12% each to EPF account. Employee’s contribution of 12% goes to EPF account and out of 12% of Employer’s contribution 8.33% transferred to pension fund and 3.67% to EPF account. You can make complete or partial withdrawals for specific purposes subject to certain rules. The amount is payable at the time of retirement or resignation. The amount can be transferred from one employer to another. Withdrawals made before completing 5 years of continuous service are taxable. The present rate of interest is 8.55% per annum. Employee’s contribution is covered under section 80C of Income Tax Act.
2. VOLUNTARY PROVIDENT FUND (VPF) -
Voluntary Provident Fund Account is similar to EPF account. If an employee wants to invest a greater amount in EPF i.e. over and above the 12% then he can voluntarily contribute any percentage of salary to this account. The interest rate would be same as that of EPF and the amount would be credited to EPF account. You can make complete or partial withdrawals for specific purposes subject to certain rules. The amount is payable at the time of retirement or resignation. The amount can be transferred from one employer to another. Withdrawals made before completing 5 years of continuous service are taxable. The present rate of interest is same as EPF account. Contribution under this scheme is also covered under section 80C of Income Tax Act.
3. PUBLIC PROVIDENT FUND (PPF) -
Public Provident Fund is one of the best, trustworthy and popular investment schemes. This account can be opened by anyone whether salaried, self-employed or businessman etc. The complete amount can be withdrawn after completion of lock-in period of 15 years. The same account can be extended for further 5 years. You can make partial withdrawal after completion of 6 years under any specific reasons like medical treatment, daughter’s marriage etc. After completion of 3 years, you can also avail loan facility. The minimum amount to be deposited annually is Rs. 500 and maximum can be up to Rs.1,50,000. Now the interest rate has been increased to 8.00% w.e.f 01.10.2018, earlier it was 7.60% from 01.04.18 to 30.09.2018. The interest earned thereon is compounded. Investment under this scheme is covered under section 80C of Income Tax Act.
Conclusion:
- If you are a salaried employee, you have to contribute to Employee Provident Fund as this is mandatory under provident fund scheme. However, if you also look for secure returns for retirement savings along with liquidity, you must contribute for Voluntary Provident Fund (VPF). Voluntary Provident Fund (VPF) would score higher than Public Provident Fund (PPF).
- If you are non-salaried employee, as an alternative, you should invest in Public Provident Fund (PPF) for good returns.
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