VPF - Rightsofemployees.com

Is NPS or VPF best for retirement planning? Read full information

Jyoti — Wed, 11 Jun 2025 04:02:38 +0000

With rising inflation and declining job stability, preparing for retirement has become a necessity, not a luxury. Two popular options in India are helping people in this direction, the National Pension System (NPS) and the Voluntary Provident Fund (VPF). Both schemes promise financial security after retirement, but there are big differences in the way they work, returns, tax benefits and risks.

What is NPS?

National Pension Scheme (NPS) is a government-run, market-linked investment scheme, open to all Indian citizens between the ages of 18 and 70, whether you are salaried or self-employed. In this, you can divide the investment into shares, government bonds, corporate bonds or other options as per your choice.

This scheme gives the investor the freedom to choose the fund manager and asset allocation of his choice. If you are young and investing for a long term, you can get better returns by investing up to 75 percent in equity through Active Choice. Its average annual return is considered to be 8 percent to 12 percent.

What is VPF?

VPF i.e. Voluntary Provident Fund is an extension of EPF (Employees Provident Fund). It is available only to salaried people who are already registered with EPF. In this, the employee can contribute up to 100 percent of his basic salary and dearness allowance.

The returns of VPF are stable, which is around 8 percent to 8.5 percent per annum and it is a fully government guaranteed scheme. Its money is managed by EPFO (Employees Provident Fund Organisation), which makes the risk zero.

Tax and withdrawal benefits

Both NPS and VPF are tax-free, but NPS offers an additional deduction of Rs 50,000 under section 80CCD (1B). On the other hand, if you invest in VPF for 5 consecutive years, the interest and maturity amount become tax-free.

VPF is more flexible in terms of withdrawal, you can withdraw money after 5 years if required. On the other hand, in NPS, the investment remains locked till the age of 60 and it is mandatory to take at least 40 percent of the amount annually (monthly pension) on maturity.

Who is better for?

NPS: If you are running your own business or want high returns over the long term while working, NPS is a better option. It provides tax planning as well as retirement security.

VPF: If you want to avoid risk and prefer a stable, government-guaranteed return, VPF would be right for you.

Some people can also avail both the stability scheme from VPF and the growth scheme from NPS.

In simple words, if you are young and want to invest for a long term, NPS may be better for you. But if you do not want to take much risk and prefer safety, then you can opt for VPF.

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Voluntary Provident Fund is a profitable deal, know why you should invest in it

Pravesh Maurya — Wed, 01 Nov 2023 09:11:42 +0000

Voluntary Provident Fund (VPF) Employed people invest in EPFO. In this they get the benefit of high interest rate along with security. Voluntary Provident Fund is also available in EPFO. This is a better option for investment. Let us know what are the benefits of Voluntary Provident Fund and why one should invest in it?

Employees working in an organized sector deposit a fixed amount of their salary in EPF. This is a kind of investment. In this, the benefit of interest is given by the government. After the employee’s retirement, he can use the amount of this fund. Along with the employee, the employer also contributes to this fund.

In the current financial year 2023-24, the interest rate in this fund has been fixed at 8.15 percent. Do you know that in EPFO, employees also get the benefit of Voluntary Provident Fund (VPF). This is also a very good option for investment. Your investment in Voluntary Provident Fund remains safe and you also get high returns. Therefore Voluntary Provident Fund is a profitable deal. Come, let us know what are the benefits of Voluntary Provident Fund?

Benefits of Voluntary Provident Fund

In this fund you are given interest by the government. If you increase your contribution in PF account then you get interest rate of 8.15 percent. In this you get the benefit of more interest than FD.

There is no limit on investing in Voluntary Provident Fund. You have to invest in VPF for at least 5 years.

The lock in period of Voluntary Provident Fund is 5 years. If you withdraw money from this fund after 5 years, you do not have to pay any tax. This means that you also get the benefit of tax benefits in this. Apart from this, you can claim tax exemption up to Rs 1.50 lakh under 80C of the Income Tax Act 1961.

How to invest in Voluntary Provident Fund

If you want to invest in VPF , you will have to inform your company about it. After this you will have to increase your PF amount. With the help of company’s HR, you can open VPF account along with EPF account. After opening the VPF account, money will start being deducted from your salary.

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EPF Interest Increased: EPFO has increased the interest rate, 6 crore people will get benefit

Pravesh Maurya — Mon, 12 Jun 2023 13:01:16 +0000

Employees’ Provident Fund Organization (EPFO) has given the gift of increased interest rates to EPF members (EPF Interest Rate Hike). EPFO has revised the interest rates to 8.15 percent for the members of Employee Pension Fund for the financial year 2022-23.

This will benefit about 6 crore active members of EPFO. The benefit of new interest rates will also be given to the EPF account holders of VPF and Trust.

The meeting of the Central Board of Trustees (CBT) of EPFO, which started on Monday, continues on Tuesday, March 28. According to EPFO, the interest rate for the financial year 2022-23 has been fixed at 8.15 percent. The Central Board has recommended depositing 8.15 per cent annual interest rate on EPF in the accounts of the members for the financial year 2022-23.

This interest rate will be officially implemented after the approval of the Finance Ministry. After this, EPFO will deposit the amount of interest rate in the accounts of its customers.

According to EPFO, the interest rate of EPF account has been increased by 0.05 percent, after which the interest rate of total EPF account has been increased to 8.15 percent. Let us inform that last year for the financial year 2021-22, EPFO had fixed the interest rate for EPF account at 8.10 percent.

EPFO will start crediting interest rate in EPF accounts after the announcement of the Finance Ministry. This notified interest rate will also be applicable on Voluntary Provident Fund (VPF) deposits. Employees who have their EPF accounts with exempted trusts will also get this rate of interest on their EPF deposits. The rate of interest of EPF being increased to 8.15% guarantees an increase in income to the members. At the same time, the interest rate of 8.15 percent and the surplus of 663.91 crores is more than the previous year.

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EPF v/s PPF v/s VPF: Which One is Better?

Rightsofemployees — Fri, 11 May 2018 03:53:19 +0000

Retirement planning has become the most talked about topic among people as young as 25. With so many investment options (Mutual Funds, Equity, ULIPs, NPS, Post office schemes, PPF, EPF Pension Plans etc.) coming up, it is becoming more difficult for youngsters to zero in on the most suitable retirement option. Going by the low risk average return (and vice versa) rule, the young population considers it wise to prefer EPF, VPF and PPF over all other options for investment/retirement. Let us understand why:

EPF, VPF and PPF: The Basics

EPF (Employee Provident Fund) – It is a provident fund created with a purpose to provide financial security and stability in future. Under this plan employees a save fraction of their salaries every month so that they can use it later at the time of retirement. It is mandatory for salaried people working in organizations registered under the Employees’ Provident fund Organization (EPFO) to contribute either 12% of their Basic + Dearness Allowance . There is more, the employee alone doesn’t contribute 12% of their salary, the employer as well contributes the same amount. Participation in EPF is mandatory for Employers who have more than 20 workers and for workers whose basic salary is more than Rs. 6,291. Also, the saved amount earns interest and is also eligible for tax deduction. The most attractive feature about EPF is that it is risk free and could be chosen as an investment tool to be used after retirement.

VPF (Voluntary Provident Fund) – As the name suggests, the employee availing VPF scheme can voluntarily contribute any percentage of his salary to the Provident fund account. Although, the contribution must be more than the PF ceiling of 12% that has been mandated by the government. The employer however is not obligated to contribute any amount towards VPF. An employee can contribute 100% of his basic salary and DA. Interest offered would be the same as EPF and this amount would be credited to EPF Scheme account only as there is no separate account for VPF.

PPF (Personal Provident Fund)
Personal Provident Fund – It is a A government-guaranteed fixed income security scheme with the special objective of providing old age financial security to the unorganized sector/ self employed (non-salaried employees). Everyone can contribute to PPF account and get risk free and assured returns. The interest earned on the PPF subscription is compounded; that means you not only earn interest in the money you put in, but you earn interest on the interest earned too. All the balance that accumulates over time is exempt from wealth tax.

Which one is better?
Now, that we have understood what PPF, EPF and VPF are, we need to find out, which is the one that stands out among all. A one on one comparison (between the 3 products) using factors like Eligibility, contribution, tax benefits, returns, withdrawal facility etc. would help us understand the pros and cons of each of them. This comparison would come handy while taking a decision regarding these products. Let us see how:

	EPF (Employee’s Provident Fund)	VPF (Voluntary Provident Fund)	PPF (Personal Provident Fund)
Opening Account	Employees in India (Salaried Individuals)		Anyone except NRI’s
Interest Rate	8.75% p.a.	8.75% p.a.	8.7% p.a.
Tax Benefit	Up to Rs. 1 Lakh per year under Sec 80C
Period of Investment	Up to retirement or resignation, whichever is earlier		15 years
Loan Availability	Partial withdrawals available		50% withdrawal after 6 years
Employer Contribution on Basic + DA	12%	NA	NA
Employee Contribution on Basic + DA	12%	Voluntary	NA
Taxation on Maturity Returns	Tax Free	Tax Free	Tax Free

Eligibility criteria:
People from unorganized sector including non-salaried employees are eligible to open a PPF account either at bank or in Post Office and earn the same assured high returns. While VPF and EPF scheme can only be availed by salaried individuals. VPF subscribers can contribute any amount over the necessary 12% which will be contributed in EPF account.

Contribution:
Besides EPF, both in VPF and PPF the contribution is voluntary. Only salaried individuals can sign up for VPF whereas PPF is for both salaried and non salaried individuals. An employee who wants to increase his retirement savings can tell the employer to deduct a certain percentage above the necessary 12% of basic pay and dearness allowance that goes towards EPF account. An employee can contribute around 100% of basic pay and dearness allowance towards VPF account (part of EPF). For VPF, the employer is not bound to contribute any amount.

Talking about the magnitude of contribution in each of the schemes, PPF account has an upper limit of Rs.1 lakh per year, whereas there is no such limit in case of VPF contribution. Also, one can contribute either a lump sum amount in the PPF account or distribute the investment amount into periodic payments.

Returns:
Presently, PPF account is offering an interest rate of 8.7%. However, since the interest rate on PPF is linked to 10-year government bond yields, it may change depending on the market but as government bonds are generally among the least risky financial products, the returns generally remain favorable. On the other hand, interest rate on VPF is not linked to G-bond yield and is the same as offered on EPF account. For the financial year, 2014-2015, EPF has fixed the rate at 8.75% which is only slightly greater than PPF rate.

Tax Benefits:
Maturity proceeds from EPF/VPF are tax exempted only if the employee has serviced the company for a continuous period of 5+ years. If he/she quits before completing 5 years, then the maturity returns would attract some tax. PPF returns on the other hand are tax free.

Investment Period:

VPF: Amount is payable at the time of retirement or resignation. Or, it can also be transferred from one employer to another if one switches jobs. On death, the accumulated balance is paid to the legal heir.

PPF: Amount can be withdrawn only on maturity, that is, after 15 years of the end of the financial year in which the product gets associated with a person.

Withdrawal facility:
In case of the PPF account that is to be maintained for a minimum of 15 years, only partial withdrawal is allowed subject to some terms and conditions The account can further be extended for another 5 years. However, the money from a VPF account can be fully and conveniently withdrawn. Further, if withdrawal from the VPF account happens prior to completing 5 years of service with the employer, then that amount would be taxed.

Loan facility:
For EPF/VPF, one can apply for a loan and also withdraw their complete investment, whereas, in PPF loans only 50% of the available balance at the end of 4th year can be withdrawn after the onset of the 6th year. In other words, full amount cannot be withdrawn.

Conclusion:
The investment options EPF, VPF and PPF have their own merits and demerits. From the above comparison we can observe that EPF and VPF score over PPF in terms of Return on investment, Employer Contribution, Liquidity. But we also know that EPF and VPF cannot be subscribed to by self-employed and employees in un-organized sector, therefore PPF is a better choice.