VPF vs PPF Which one should you choose and why?

Comparing VPF and PPF as the investment option for employees

Voluntary Provident Fund

As an investment, both Voluntary Provident Fund (VPF) and Public Provident Fund (PPF) are equally secured and rewarding. VPF is an offshoot of the Employee Provident Fund (EPF) and hence generates a comparatively higher return. Let us understand the VPF vs PPF comparison through their respective definitions and the points of difference.


As mentioned, VPF is an extension of EPF. Employees of eligible organisations contribute to their EPF accounts. There should be a compulsory contribution of 12% of the basic salary, and an equal amount is contributed by the employer as well. If the employee wants to contribute more than their share of 12%, they can contribute under VPF provisions. There is no maximum limit on an employee’s VPF contribution up to the person’s salary amount. Such contribution is deposited in the EPF account and generates the same rate of interest. The employer is not required to contribute a VPF amount.

Also Read: 5 things you need know about VPF


PPF is a popular form of investment which is open to the public, and not just employees. Investment in PPF can be made between Rs 500 and Rs 1,50,000 in a year. Resident Indians, whether engaged in the formal or informal sector can invest in PPF. A self-employed person cannot invest in VPF, so PPF is their only option of investment between the two.

People working in eligible organisations have the option of either going ahead with VPF or choosing PPF to meet their long-term financial goals. They can do so after studying the various aspects of VPF and PPF.

Also Read: How well do you understand PPF


The lock-in period – Investment in VPF remains locked in till the employee retires or resigns, whichever is earlier. In the event of the death of the employee, the fund gets disbursed to the nominee as per the VPF withdrawal rules. Early withdrawal from VPF is possible, subject to specific criteria given under the VPF withdrawal rules. This includes circumstances like marriage, children's education, emergency medical expenditure, payment of loans etc.  

PPF investments have a fixed lock-in period of 15 years. Premature closure or withdrawal from PPF is possible only after five years of continuous contribution. Such withdrawal is allowed subject to certain conditions only. 

Extension – VPF cannot be extended beyond the retirement age of the employee. However, PPF can be extended beyond 15 years, in blocks of 5 years. The long-term suitability of either option will depend on the age of the investor.

VPF vs PPF interest rate – VPF gives you a higher interest rate, i.e., 8.1%. The interest earned on PPF is a lower but respectable 7.1%. 

Contribution method – In the case of VPF, the existing EPF account acts as the EPF cum VPF account. The investor needs to approach the office HR/Finance person-in-charge and request them to raise the additional contribution through a registration form. VPF is linked with Aadhaar and can easily be transferred from one employer to another.

PPF accounts can be opened in any post office or a bank that provides this service. You must fill out the PPF account opening form, along with your KYC documents and a passport-sized photograph. You can start the account with a minimum deposit of Rs 500. If you open a PPF account with a bank, you can use its net banking and mobile banking facilities to operate the account, including online contributions.

Also Read: FD vs PPF vs EPF vs Sukanya Samriddhi Yojana vs Post office schemes where should you invest which

Investors looking to earn a higher rate of interest and are willing to wait till their retirement age should opt for a VPF investment. PPF investment, on the other hand, is suitable for investors for whom the 15-year lock-in period is appropriate. As mentioned earlier, the age of the investor is an important determiner in this decision. Someone approaching retirement but looking for long-term investment will find PPF appealing. However, a young employee looking for long-term investment will benefit from the high returns of the VPF savings.

Both VPF and PPF are good investments with decent rates of return, tax savings and an assured sovereign guarantee on investments. Choose your option and build long-term personal finance for you and your loved ones.


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