EPF vs PPF vs VPF Accounts: Which one is better? Experts Jitendra Solanki, Kartik Jhaveri explains

EPF vs PPF vs VPF: Employees' Provident Fund (EPF) and Public Provident Fund (PPF) is considered one of the most favoured retirement fund oriented investment options in India. EPF is an automatic investment as it gets opened once one gets employed.

Those who are not employed, PPF is a better option for them. But, for those who are employed, they should go for the Voluntary Provident Fund (VPF) instead of PPF. Photo: Reuters

EPF vs PPF vs VPF: Employees' Provident Fund (EPF) and Public Provident Fund (PPF) is considered one of the most favoured retirement fund oriented investment options in India. EPF is an automatic investment as it gets opened once one gets employed. However, PPF is a voluntary investment option where an investor chooses to invest by opening a PPF account. Both EPF and PPF are risk-free but in EPF, the Centre announces interest rate on yearly basis. In PPF, central government announces interest rate on quarterly basis. Recently, EPF interest rate for FY 2019-20 has been announced 8.5 per cent while PPF interest rate for January to March 2021 is 7.1 per cent.

Speaking on EPF vs PPF, SEBI registered tax and investment expert Jitendra Solanki said, "EPF is opened by the recruiter and both employer and employee contributes in the EPF account every month. However, PPF is a voluntary account and it can be opened by any Indian citizen. Both provide income tax exemption under Section 80C of the Income Tax Act (ITA). Apart from this, this Rs 1.5 lakh ceiling is the total sum invested in various schemes listed in Section 80C of the ITA."

Solanki said that PPF investors are those who want to invest with zero risk and accumulate wealth for their retirement fund.

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Speaking on PPF vs EPF; Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Those who are not employed, PPF is a better option for them. But, for those who are employed, they should go for the Voluntary Provident Fund (VPF) instead of PPF. In this option, one will be able to get 8.5 per cent on one's annual investment with the same benefits of EEE that a PPF account will give. However, on VPF investment, the recruiter is not bound to go for the same monthly EPF contribution that the employee has chosen. If an employee choses VPF, the recruiter need not to pay the monthly contribution like EPF, because a recruiter is not bound to contribute on EPF contribution above 12 per cent of the basic pay of an employee."

Highlighting the benefit that an employee will get on choosing VPF instead of PPF Jhaveri said, "By choosing VPF, the employee won't get matching amount from employer's monthly contribution that he or she gets in the case of EPF account, but it will help fetch annual interest of 8.5 per cent instead of 7.1 per cent PPF interest."

Apart from this, Jhaveri said that EPF gives greater return than any other risk-free government-backed small savings schemes. He said that one will have one account to avail of Section 80C benefit while Income Tax Return (ITR) filing that is also a benefit to file ITR smoothly.

On how to choose VPF, Jhaveri said, "At the beginning of the financial year i.e. in the month of March or April or at the time recruitment, one can inform the HR about wishing to opt for VPF along with EPF."

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