Public Provident Fund (PPF) and Voluntary Provident Fund (VPF) are two investment instruments that offer high security together with steady returns. Retirement plans are all that people are talking these days. With a wide range of investment options available in the market, such as Equity, Mutual funds, National Pension System, etc. which has made it difficult for people to decide which one if the best option for them. In such a scenario, they can opt for low-risk investment products such as Employee Provident Fund (EPF), Personal Provident Fund (PPF) and Voluntary Provident Fund (VPF). Both these instruments are offered by the Government of India to help people save for their retirement.

VPF and PPF: What is the difference?

There are few differences between a PPF and VPF account. Let’s take a look at some of the key differences between the two –

• A VPF account is meant for only the salaried employees, while a PPF account can be opened by self-employed or people from the unorganized sectors.
• A PPF account offers an interest rate of 8.7% on your savings, while the interest offered on VPF is equivalent to that of an EPF account which is 8.75%.
• In the case of a PPF account, the amount deposited over years cannot be withdrawn until the account matures and the maturity period of the same is 15 years. However, on the other hand, employers can withdraw funds from VPF account as and when needed. But if the amount is withdrawn before the account completes 5 years, the amount is taxed.

Why investing in VPF is easier than PPF?

When it comes to PPF, you will either have to walk up your post office or operate it online through a designated bank. For VPF, it’s much easier; all you have to do is to instruct the accounts department of your office and you do not have to do anything till you change your job. A fixed pre-decided amount will be deducted from your account every month. This ensures maintaining investment discipline while making savings easy.

In addition, with respect to the tax benefits, VPF is completely eligible for full tax deduction under section 80C. Just like the PPF, it benefits with the highest EEE (exempt-exempt-exempt) category. This makes your entire VPF investment tax free along with the interest earned as well as the entire corpus at the time of withdrawal.

So taking into consideration the interest rate and other aspects of withdrawal and provision of loan in case of VPF account, it overpowers a PPF scheme. Besides this, it is vital to know that while a PPF account can be maintained by anyone, VPF can exclusively be maintained by salaried class people.