PPF interest rate: Junk Public Provident Fund? Check out VPF, big bonanza awaits!

PPF vs VPF: Both voluntary provident fund (VPF) and Public Provident Fund (PPF) are debt-funds and both investments help an investor to claim income tax exemption under Section 80C of the Income Tax Act.

PPF vs VPF: In VPF, one can ensure 8.65 per cent returns while in PPF, one would get only 7.9 per cent. Photo: Reuters

PPF vs VPF: If all goes well, the Ministry of Labour and Employment is soon going to notify an increase in the interest rates employees get from the Employees' Provident Fund (EPF). An announcement in this regard was made by the minister Santosh Gangwar on August 30. So, those EPFO subscribers, who are getting PF cut from their salaries, will get 0.1 per cent additional interest on their money. However, those who want to save more from their surplus fund available with them post-PF and other investments along with income tax exemption benefits, voluntary provident fund (VPF) can be a better option as it would help them fetch 0.75 per cent more than the Public Provident Fund (PPF)! On PPF, one gets 7.9 per cent return while in VPF, one would get 8.65 per cent return along with income tax exemption under Section 80C of the Income Tax Act (ITA). Interestingly, both are debt-funds and are almost risk-free investments meant for retirement planning.

Speaking on the benefits that one can get on VPF instead of PPF, Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants said, "Both VPF (Voluntary Provident Fund) and PPF (Public Provident Fund) are debt-funds and both investments help investors to claim income tax exemption under Section 80C of the Income Tax Act. However, in VPF, one can ensure 8.65 per cent returns while in PPF, one would get only 7.9 per cent."

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On how to open a VPF account Jitendra Solanki, a SEBI registered tax and investment expert said, "For PF deduction, you get deposits from the recruiters too. However, VPF is a voluntary provident fund investment and for this, one can't get deposits from the recruiters. But, to claim Section 80C benefits while filing the ITR (Income Tax Return), Indian millennials invest in PPF. So, if they ask their recruiter to deduct the same amount in VPF that they want to invest in PPF, the salaried individual can get the income tax benefits along with 0.75 per cent additional returns on his or her investments. This 0.75 per cent addition returns would help them earn a huge amount after retirement."

Pressing on why one should invest in VPF instead of PPF Jhaveri said that both are meant for retirement planning means long-term investments and both require lowest risk-appetite from the investors. Hence, investment in VPF is advisable for an earning individual ahead of the PPF.

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