Which one is a better bet for you? -

Which one is a better bet for you?

More and more people in Indian these days have started planning about their retirement since early age, and both voluntary provident fund (VPF) and public provident fund (PPF) are popular options. Let’s look at these schemes in detail, and which one would be a better bet for you.

Voluntary provident fund

An individual going for VPF can volunteer to contribute any part of his salary to the provident fund. The contribution needs to be more than 12% of the basic salary and dearness allowance, which has been mandated by the government. The employer, however, don’t have to contribute any amount towards VPF. Moreover, an employee can contribute 100% of his basic salary and DA.

VPF is open to any employee working in India and gives a return of 8.50% per annum. Investors in this scheme get a tax benefit under Section 80C of the Income-tax Act, plus returns on maturity are also tax-free.

While the maturity period, in this scheme till retirement, partial withdrawal is available on account of unemployment for more than two months, for purchase of construction of a house, medical purposes, marriage of self or a dependent person or repayment of a loan.

Public provident fund (PPF)

It is a popular savings scheme offered by the government. This scheme is meant to help individuals working in all sectors (including informal jobs) save and invest small amounts. A maximum investment of 1.5 lakh a year or 12,500 a month is allowed in this scheme. The minimum investment amount is 500 in a year. Investors also get tax deductions of up to 1.5 lakh a year.

The interest and matured value are both exempt from taxation in the year of withdrawal. Keep in the mind that the maturity period of PPF is 15 years from the date of account opening, but premature withdrawal is allowed after completion of the 7th year of account opening.

While VPF is only for salaried individuals, PPF is for both salaried and non-salaried individuals, except non-resident Indians (NRIs). While PPF has a maximum investment limit of 1.5 lakh, there is no such limit in VPF. In terms of returns, PPF is offering 7.10% per annum, while VPF is offering 8.5%. However, these rates are expected to fall in the future.

Both EPF and PPF have their own set of positives and negatives. With VPF, you don’t have to worry about depositing the money from your savings account; however, PPF offers a much-needed relief as you can contribute whenever you can. Among the two, VPF looks the better investment option as it not only offers the highest interest, but also offers EEE or exempt-exempt-exempt status and enjoys triple tax exemptions. It means you get a tax exemption at the time of investment.

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