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 offer individuals various options for investing in their future financial security. The Voluntary Provident Fund (VPF), Employee Provident Fund (EPF), and Public Provident Fund (PPF) are popular choices among individuals looking 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 scheme is more suitable for your needs.
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Take a look at which scheme might be more suitable for you.
EPF:
It is a mandatory retirement savings scheme. Both the employer and the employee contribute to the EPF. The contribution of the worker and employer is fixed according to the salary structure. While partial withdrawals are allowed, the entire corpus will be released only once the person reaches retirement age. The plan provides 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 reducing taxation. PPF has a minimum tenure of 15 years. Partial withdrawals are allowed after a certain duration. The investment option is for both salaried and non-salaried individuals who want a bit of flexibility in their long-term savings plan.
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VPF:
While the monthly contribution is fixed, employees can give higher amounts to the fund on a voluntary basis. This means if they receive a bonus or other income in excess (for example, rent from property or income from mutual funds), people can add that amount to their retirement plan. This will help them reach their financial goals more easily. If you withdraw the money after five years, no tax will be deducted.
Which one is better for you?
EPF and VPF are basically the same, minus the option to voluntarily add extra money to the Voluntary Provident Fund. PPF has a lock-in period but offers flexible withdrawals.
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In the case of the Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF), the interest earned is not taxed if it remains below Rs 2.5 lakh in a financial year for most individuals, while government employees have a higher threshold of Rs 5 lakh. However, if the interest exceeds these thresholds, it will be subject to taxation under income from other sources. On the other hand, the interest earned on the Public Provident Fund (PPF) is not taxable.
All of these options are low-risk. Depending on your monetary goals, interest rate, duration of investment and other factors, you can choose the best plan for yourself.
