Which investment in VPF and PPF is beneficialHemlata Khandelwal / 2021-02-26 01:47:37
Voluntary Provident Fund (VPF) and Public Provident Fund (PPF) are very popular investment options. Which of them is good, has been debated. There are many aspects that separate them from each other. These include eligibility, duration of investment, returns, liquidity, tax benefits, etc. Let's see here which of these options is better for you.
Who can invest?
VPF is an extension of the Employee Provident Fund ie EPF. Only those employed people who have an active EPF account or have a PF registration and make regular contributions to the EPF. As the name suggests, it is a voluntary contribution in addition to the mandatory contribution of EPF. At the same time, the investment option in PPF is for everyone. Even the account of minors can be opened through the parents.
Which one has more tax savings?
When it comes to tax deduction benefit on the amount invested, VPF like EPF also gets exemption under section 80C. This rebate is available for investments up to Rs 1.5 lakh in a financial year. This deduction is also found in PPF. However, the tax on returns from these two products is treated differently. Tax returns are available on the entire PPF Return. However, one can invest up to Rs 1.5 lakh only.
Recently, in the Union Budget, the exemption limit has been fixed on the returns received from the VPF. According to the proposal, if the investment in VPF and EPF is more than Rs 2.5 lakh, then the interest earned on a good amount will be taxed.
Does not matter in the holding of both?
PCBF's interest machines are fixed every quarter. Its interest numbers for the quarter ending March 2021 are 7.1 per. The EPF interest rate for the financial year 2020-21 is yet to be announced. For the financial year 2019-20.
What is the minimum and maximum you can invest?
You can invest at least Rs 500 and a maximum of Rs 1.5 lakh in PPF. If you do not make minimum investment any year, the account becomes 'inactive'. The VPF does not have restrictions on such minimum and maximum contractions.
What is better in VPF and PPF?
Salaried employees can opt for VPF by submitting an application to their company. In this, you have to tell how much you want to invest in VPF. Despite being an attractive investment option, VPF outperforms the liquidity front over PPF. You cannot withdraw money from VPF till retirement. However, PPF gives you many options. Such as loan, or withdrawal with certain conditions when required. In such a situation, financial planners recommend choosing VPF with caution keeping in mind the lock-in period.
If you are ready to leave this liquidity till retirement, then VPF is the best option for salaried employees. PPF remains attractive to non-salaried people. But, the only drawback is that you can invest a maximum of Rs 1.5 lakh in a year.