EPF Vs PPF Vs VPF Vs NPS – Which is the Best Investment?




EPF Vs PPF Vs VPF Vs NPS - Which is the Best Investment OptionIf you are an employee, you might be aware of the Employee Provident Fund (EPF), Public Provident Fund (PPF), Voluntary Provident Fund (VPF) and National Pension Scheme (NPS). All these investment options would help employees to save income tax as well as to grow their money. What are the differences between EPF Vs PPF Vs VPF Vs NPS? Among EPF, PPF, VPF and NPS, Which is the Best Investment Option for you?

Also Read: How to check Employee Provident Fund (EPF) Balance Online?

What is Employee Provident Fund (EPF)?


EPF is a retirement benefit that is applicable only to salaried employees. In EPF, the employer and the employee contribute 12% of the employee’s salary, which includes basic salary, and dearness allowance (DA). The EPF amount earns interest at the rates declared by the government. The interest rates are revised by the Central Government every year, depending upon the revenues made by the EPFO on its previous year’s deposits. All organizations with 20 or more employees are required by law to register for the EPF scheme while those who have fewer employees can register voluntarily. It is maintained solely by the Employees’ Provident Fund Organization (EPFO) of India.




What is Voluntary Provident Fund (VPF)?


Voluntary Provident Fund (VPF) is a voluntary contribution from the employee towards their provident fund. This contribution is over and above the mandatory contribution of 12% towards EPF. The option of VPF is available to only those who all salaried individuals and receive monthly payments through a specific salary account. Self-employed individuals and people working in unorganized sectors cannot open the VPF account. The maximum limit of contribution is up to 100% of the basic salary and dearness allowance. A VPF is an extension of EPF, but there is no pressure either for the employee or for the employer to contribute to this fund.

What is Public Provident Fund (PPF)?


Public Provident Fund or PPF is an important tax-saving tool available to all the citizens of India. It is an account that can be opened with any authorized bank or its branch or post office. It is a long-term investment, in which the investor can invest any amount between the range of Rs 500 to Rs 150,000 per annum and receives interest on it.   The interest rates are governed by the Central Government of India. The interest is credited annually in the account. The account is opened for a tenure of 15 years. After maturity, the account can be continued for 5 years with or without depositing the funds. It is compulsory to invest a minimum amount in the account to keep it active. Failure may result in the inactivation of the account.

What is National Pension Scheme (NPS)?


National Pension Scheme (NPS) is an investment scheme in which voluntary and defined contribution towards a corpus is made which is reinvested in the diversified portfolios comprising of government bonds, corporate debentures and equity. All citizens of India from the age of 18 years till their retirement are eligible to invest in this scheme. The returns in NPS are market-linked and hence the contribution would grow and accumulate over the years, depending on the returns earned on the investments made. The only drawback with this account is that it lacks liquidity. The funds get locked once deposited in this account as there are so many terms and conditions attached to the premature withdrawal.  

EPF Vs PPF Vs VPF Vs NPS – Which is the Best Investment Option?


The four investment options have their pros and cons. Let us check what is the difference between these investment options.

Who is eligible to invest in EPF, PPF, VPF and NPS?


Employee Provident Fund (EPF): Employees in India are eligible to invest.

Voluntary Provident Fund (VPF): Employees in India are eligible to invest.

Public Provident Fund (PPF): All Indian citizens are eligible to invest except for NRIs. If an individual became  NRI later on, they can continue their PPF without fresh investments.  

National Pension Scheme (NPS): All individuals, including NRIs can invest.

How much one can contribute in these schemes?


EPF: Employee contribution is 12% of basic + DA. The employer contribution is 12% of salary + DA, however 8.33% goes to pension scheme and 3.67% goes towards EPF.

VPF:  Employee can contribute up to 12% and not fixed. There is no mandatory requirement from employer to contribute to EPF.

PPF: One can contribute a minimum of Rs 500 and maximum of Rs 1.5 Lakhs in a financial year. There is nothing like employer contribution here.

NPS:  Employees can contribute a minimum of Rs 6,000 per financial year and no maximum limit. There is no employer contribution.

How long we can invest in EPF, PPF, VPF and NPS?


EPF: One need to invest in EPF till retirement or resignation, whichever is earlier.

VPF: One need to invest in VPF till retirement or resignation whichever is earlier.

PPF: One need to invest in PPF for 15 years time frame and can extend for a 5 year block period.

NPS: One need to invest up to retirement.




You may like: Does Voluntary Provident Fund (VPF) Scores over PPF?

What are the interest rates / returns offered by these schemes?


EPF: Interest rate is decided by Govt of India every year. The Current EPF Interest rate in 2019 is 8.65% per annum.

VPF: Interest rate is same as EPF.

PPF: Interest rates are fixed by the Ministry of Finance every quarter. PPF Interest rates for Oct to Dec-2019 quarter is 7.9% per annum.

NPS: NPS returns are not fixed as they invest based on the investment objective (Debt, Equity or Mixed). The returns would range between 8% to 14%.

What are the Income Tax Benefits on investments done in such schemes?


EPF: Investment up to Rs 1.5 Lakhs are eligible for income tax benefits u/s 80C.

VPF: Investment up to Rs 1.5 Lakhs are eligible for income tax benefits u/s 80C.

PPF: Investment up to Rs 1.5 Lakhs are eligible for income tax benefits u/s 80C.

NPS: Investment up to Rs 1.5 Lakhs are eligible for income tax benefits u/s 80C. Beyond this, one can get Rs 50,000 additional tax benefit u/s 80C (1B) totaling to Rs 2 Lakhs tax benefit for NPS.

What are the Income Tax Benefits of Maturity of such schemes?


EPF: Maturity amount is exempt from tax after the continuous 5 years of service.




VPF: Maturity amount is exempt from tax after the continuous 5 years of service.

PPF: Maturity amount is exempt from income tax.

NPS: The amount used to purchase an annuity is not taxed but annuity income is taxed in the year of receipt. Lump sum withdrawal in excess of 40% is taxable.

Can we get loans on EPF, PPF, VPF and NPS?


EPF: Loan facility is available.

VPF: Loan facility is available.

PPF: Can obtain loan against the balance in your account between the 3rd and 6th financial year

NPS: Loan facility is not available.

Can we purchase Annuity Pension Plans from such schemes?


EPF: Annuity plan is not applicable.

VPF: Annuity plan is not applicable.

PPF: Annuity plan is not applicable.

NPS: Annuity plan is mandatory.




Are there any pre-withdrawal options in such schemes?


EPF: You can make complete or partial withdrawals subject to certain terms and conditions. Withdrawal before 5 years of continuous service is taxable.

VPF: You can make complete or partial withdrawals subject to certain terms and conditions. Withdrawal before 5 years of continuous service is taxable.

PPF: Partial withdrawals are allowed from 7th year onwards.

NPS: Withdrawal rules are very rigid. You can withdraw only 20% before retirement.

You may like: How to calculate your eligible Gratuity?

EPF vs. VPF vs. PPF vs. NPS – Which is the Best Investment Option?


EPF is the best and safest investment tool for salaried employees as it is backed by the Government of India. The interest rates are also quite lucrative. VPF is best for those who want to invest more than the mandatory contribution of EPF.

PPF is a Government scheme meant for the salaried, unorganized sector or non-salaried employees. It offers safe and assured returns. It is a great option to accumulate wealth for retirement. If you can plan well, you can invest in PPF along with your spouse and create 1 Crore corpus.

NPS offers higher returns, but it possesses very low liquidity. It is more designed to get a regular pension after retirement. Alternatively, you can invest in a diversified portfolio of mutual fund schemes and keep reviewing over a period of time.

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Suresh KP

EPF Vs PPF Vs VPF Vs NPS – Which is the Best Investment Option



Suresh KP

18 comments

  • KSV Santhanam

    I have 4 years of service for retirement. If I contribute additionally in VPF from now on, whether the maturity value on retirement from VPF is taxable?

  • Bharat Vayeda

    Which one is better VPF or NPS my age is 56

  • RAJEEV

    I AM 55 YR OLD A STATE GOVT. EMPLOYEE AND HAVING NPS. IN MY NPS ONE AMOUNT DEDUCAT MY SALARY AND THE SAME AMOUNT PAID BY GOVT. AFTER 5YR AT RETAIRMENT I CAN WITHDRAW MY COMPLETE NPS FUND (MY CONTRIBUTION + GOVT CONTRIBUTION) . I INVEST EXTRA AMOUNT IN NPS SO I GET A HANDSOME AMOUT AT RETAIRMENT. PLEASE ADVISE.

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