VPF vs PPF – Who’s better

VPF vs PPF – Which is bet­ter? Many of us have this ques­tion and want to know which is bet­ter as an invest­ment option, VPF (Vol­un­tary Prov­i­dent Fund) or Pub­lic Prov­i­dent Fund. As the name sug­gests both the prod­ucts – VPF and PPF are prov­i­dent fund schemes. Let’s under­stand the two schemes in detail –

What is Vol­un­tary Prov­i­dent Fund (VPF)

Vol­un­tary Prov­i­dent Fund – What is this?

Note – Only Salaried employ­ees have the option of Vol­un­tary Prov­i­dent Fund.

What is Pub­lic Prov­i­dent Fund (PPF)

VPF vs PPF – Inter­est Rate

Inter­est Rate on Vol­un­tary Prov­i­dent Fund (VPF) is same as EPF inter­est rate.

VPF: 8.5% per annum (For the year 2010 –2011, you can expect a return of 9.5% per annum)

PPF: 8% per annum

VPF vs PPF – Invest­ment period

VPF – Amount is paid at the time of retire­ment or res­ig­na­tion. Or, it can be trans­ferred from one com­pany to the other if one changes jobs. On death, the accu­mu­lated bal­ance is paid to the legal heir.

PPF –Amount can be with­drawn on matu­rity, that is, after 15 years of the close of the finan­cial year

VPF vs PPF – Impact of Tax

VPF
Invest­ment qual­i­fies under Sec­tion 80C under the Rs 1, 00, 000 limit.

PPF
Invest­ment qual­i­fies under Sec­tion 80C under the Rs 1, 00, 000 limit. On matu­rity, you pay absolutely no tax.

VPF or PPF — Which is better?

To sum up, major dif­fer­ence between VPF and PPF is the rate of return.Rate of inter­est on VPF is also higher (cur­rently 8.50%) than inter­est on PPF (8%).

If you are salaried and have to decide between the two, VPF is bet­ter than PPF.

Related posts:

1. EPF vs PPF – Which is a bet­ter option
2. Employee Prov­i­dent Fund (EPF)
3. Vol­un­tary Prov­i­dent Fund (VPF)
4. EPF at 9.5% — Should I invest
5. EPF rate increased from 8.5% to 9.5%