Both the employer and the employee contribute to EPF. (Representational Image)
EPF vs PPF vs VPF: By understanding the details and aligning them with your financial goals, you can determine which scheme is more suitable for your needs.
Government-backed retirement plans provide various options for individuals to invest in the financial security of their future. Voluntary Provident Fund (VPF), Employees’ Provident Fund (EPF), and Public Provident Fund (PPF) are popular options among individuals who want to secure their retirement. Each plan has its own set of withdrawal rules, eligibility criteria and risk factors to consider. By understanding the details and aligning them with your financial goals, you can determine which plan is more suitable for your needs.
Read also: EPFO e-enrollment process; Step-by-Step Guide to Adding a Description
Know which scheme can be more beneficial for you.
EPF:
It is an essential retirement savings plan. Both the employer and the employee contribute to EPF. The contribution of the worker and the employer is decided according to the salary structure. While partial withdrawal is allowed, the entire amount will be released only when the individual reaches the age of retirement. The scheme offers tax benefits. EPF is suitable for salaried individuals who need a retirement-focused savings option.
PPF:
It allows individuals to contribute to their retirement funds while minimizing taxation. The minimum tenure of PPF is 15 years. Partial withdrawal is allowed after a certain period. The investment option is for both salaried and non-salaried individuals who want some flexibility in their long term savings plan.
VPF:
While the monthly contribution is fixed, employees can contribute a higher amount to the fund on a voluntary basis. This means that if they receive a bonus or other income in excess (for example, rent from a property or income from a mutual fund), people can add that amount to their retirement plan. This will help them achieve their financial goals more easily. If you withdraw money after five years, no tax will be deducted.
Which is better for you?
EPF and VPF are basically the same, minus the option to voluntarily add additional funds to the Voluntary Provident Fund. PPF has a lock-in period but has the facility of flexible withdrawal.
Interest earned in case of Employees’ Provident Fund (EPF) and Voluntary Provident Fund (VPF) is not taxed if it remains below Rs 2.5 lakh in a financial year for most individuals, while Rs 5 lakh for government employees. is the upper limit. Lakh. However, if the interest exceeds these limits, it will be subject to taxation under the head Income from other sources. On the other hand, the interest earned on Public Provident Fund (PPF) is not taxable.
All of these options are low risk. Depending on your monetary goals, rate of interest, investment tenure and other factors, you can choose the best scheme for you.
