VPF (Voluntary Provident Fund) and PPF (Public Provident Fund) are popular saving schemes in India that help people build their wealth securely for the future. Both options offer guaranteed returns and valuable tax benefits, making them ideal choices for long-term financial planning.

VPF vs PPF Overview

Voluntary Provident Fund (VPF)

Voluntary Provident Fund (VPF) is an extension of the Employee Provident Fund (EPF) that allows salaried employees to contribute more than the mandatory 12% of their basic salary towards retirement savings. Since it is backed by the Government of India, VPF is considered one of the safest long-term investment options offering guaranteed returns.

Eligibility Criteria for VPF

Only salaried individuals who are already contributing to the EPF can opt for the VPF scheme.
You must contribute more than the standard 12% EPF contribution to qualify as a VPF contribution.
VPF is not available to self-employed individuals, business owners, freelancers, or anyone who does not have an EPF account.

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Contribution to the Voluntary Provident Fund

Employees can voluntarily contribute up to 100% of their basic salary plus dearness allowance (DA).
The contribution is entirely employee-funded. Employers do not make any matching contributions to VPF.
You can increase or decrease your VPF contribution at the beginning of a financial year or as per your employer’s payroll policy.

Maturity Period for Voluntary Provident Fund

VPF follows the same timeline as EPF, meaning the funds are locked in until retirement, resignation, or termination of employment.
Partial withdrawals are allowed under specific conditions such as marriage, medical emergencies, higher education, purchase of property, or home loan repayment.
If you withdraw your VPF balance before completing 5 years of continuous service, the withdrawn amount becomes taxable.

Tax Implications on Voluntary Provident Fund

Contributions made towards VPF qualify for tax deduction under Section 80C, up to ₹1.5 lakh per financial year.
Both the interest earned and maturity proceeds are tax-exempt, provided the account has been held for a continuous period of at least 5 years.
Early withdrawal (before 5 years) attracts tax on the interest earned and employer’s contributions (if any), and TDS may also apply based on the withdrawal amount.
VPF is ideal for individuals in higher tax brackets who want to grow their retirement corpus with low risk and tax-free returns.

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a long-term, government-backed savings scheme designed to encourage disciplined investment and build a secure financial future. Known for its attractive tax benefits and guaranteed returns, PPF is one of India’s most popular investment options for risk-averse investors.

Eligibility Criteria for Public Provident Fund

Any Indian citizen whether salaried, self-employed, working in the unorganised sector, or even not employed can open a PPF account.
Minors are also eligible, with a parent or legal guardian managing the account on their behalf.
NRIs and HUFs cannot open new PPF accounts, although existing accounts opened before becoming an NRI may be continued until maturity.

Contribution to the Voluntary Provident Fund

Employees can voluntarily contribute up to 100% of their basic salary plus dearness allowance (DA).
The contribution is entirely employee-funded. Employers do not make any matching contributions to VPF.
You can increase or decrease your VPF contribution at the beginning of a financial year or as per your employer’s payroll policy.

Maturity Period for Voluntary Provident Fund

VPF follows the same timeline as EPF, meaning the funds are locked in until retirement, resignation, or termination of employment.
Partial withdrawals are allowed under specific conditions such as marriage, medical emergencies, higher education, purchase of property, or home loan repayment.
If you withdraw your VPF balance before completing 5 years of continuous service, the withdrawn amount becomes taxable.

Tax Implications on Voluntary Provident Fund

Contributions made towards VPF qualify for tax deduction under Section 80C, up to ₹1.5 lakh per financial year.
Both the interest earned and maturity proceeds are tax-exempt, provided the account has been held for a continuous period of at least 5 years.
Early withdrawal (before 5 years) attracts tax on the interest earned and employer’s contributions (if any), and TDS may also apply based on the withdrawal amount.
VPF is ideal for individuals in higher tax brackets who want to grow their retirement corpus with low risk and tax-free returns.

VPF vs PPF: Comparison Table

Parameter

Voluntary Provident Fund (VPF)

Public Provident Fund (PPF)

Who Can Invest

Only salaried employees who are EPF members

Any Indian citizen (salaried, self-employed, unorganised); minors allowed

Minimum / Maximum Investment

No fixed minimum; employees can contribute up to 100% of basic salary + DA

Minimum ₹500; maximum ₹1.5 lakh per financial year

Employer Contribution

None VPF is entirely employee-funded

Not applicable

Interest Rate

Around 8.5% (linked to EPF interest rate, revised yearly)

Around 7.1% (announced by the government quarterly)

Lock-In / Maturity

Locked in till retirement/resignation; minimum 5 years for tax-free benefits

15-year lock-in; extendable in 5-year blocks

Withdrawal Rules

Partial withdrawal allowed under specific conditions; withdrawal before 5 years is taxable

Partial withdrawals allowed from 7th year; full withdrawal at 15 years

Tax Benefits

Eligible for Section 80C deduction; EEE (tax-free interest and maturity after 5 years)

Eligible for Section 80C deduction; EEE (tax-free interest and maturity)

Conclusion

Both VPF and PPF are trusted, government-backed investment options that help investors build long-term wealth with minimal risk. VPF works best for salaried employees who want to strengthen their retirement corpus through higher, EPF-linked interest rates and enjoy additional tax savings. It’s ideal for those who prefer disciplined, payroll-based investing.

PPF, on the other hand, is open to all Indian citizens, making it a versatile choice for investors seeking safe, long-term growth with complete tax exemption. Its 15-year lock-in encourages financial discipline, while the option to extend in 5-year blocks makes it suitable for long-term life goals such as children’s education or retirement planning.

In short, VPF is more advantageous for employees with stable salaries, while PPF suits conservative investors looking for secure, flexible, and tax-efficient wealth creation. The right option ultimately depends on your employment status, investment horizon, and financial objectives.

Frequently Asked Questions (FAQs)

Can I invest in both VPF and PPF?

Yes, salaried individuals can contribute to both schemes to maximize safe returns and tax savings.

What happens if I withdraw VPF early?

Withdrawals before 5 years in VPF make the matured amount taxable; try to avoid premature withdrawal for maximum benefit.

Is PPF interest always tax-free?

Yes, PPF enjoys EEE (Exempt-Exempt-Exempt) status, so both interest and maturity are tax-free under Section 80C.

Who should prefer VPF?

Salaried employees expecting higher returns and willing to lock in funds for retirement should prefer VPF.

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