Multiple PF schemes EPF, VPF & PPF available. Choose one, two or all three ? best benefits?

Hello all.

As we know there are the provident schemes available in EPF, VPF & PPF. Always the question comes to opting for all 3 or just the mandatory one. So many questions are asked on these lines.

There are multiple articles with multiple information but not clear on few questions. All address on tax saving front but not on how the contributions would act as benefits.

1. Does an employee opt for all 3- EPF, VPF & PPF schemes benefits? what are the best benefits?
2. Employee contributing to VPF is a good suggestion? What is the immediate good and bad?
3. Rate of Interest (per annum) of PPF usually lesser than EPF/VPF. Investing in PPF a good choice?

Community members, please suggest information in detail.

regards,
Jyoti

2 Likes

Hello Jyoti

Let me attempt to answer your queries one by one:

  1. Does an employee opt for all 3- EPF, VPF & PPF schemes benefits? what are the best benefits?
    Ans: An employee is eligible to opt for all three schemes. While EPF is mandatory where an employee contributes 12% of basic pay and equally contributed by employer too, the VPF and PPF are investment options available for the employee to participate in.
    As the name itself suggests, VPF is a voluntary contribution into your existing EPF account. A percentage of your basic pay or a fixed amount can be deducted from your salary and credited into that account by your payroll department every month along with your EPF contributions.
    In the case of PPF, you can open this in any bank or through post office. It is a separate investment account but the scheme is similar to EPF. All three schemes are eligible for Sec.80C deductions up to Rs 1.5LPA

  2. Employee contributing to VPF is a good suggestion? What is the immediate good and bad?
    VPF is a good investment option as it earns the same rate of interest as EPF does. Secondly, it is eligible for Sec 80C for tax exemptions. Thirdly, it has a lock-in period as much as EPF scheme has, which turns into a good retirement fund. The only bad is see in this is it has no easy cash liquidity as it is a retirement fund.

  3. Rate of Interest (per annum) of PPF usually lesser than EPF/VPF. Investing in PPF a good choice?
    The current rate of interest on PPF is 7.1%, which is much lower that EPF/VPF which is hovering around 8.5%, but subject to constant change. The advantage with PPF as compared to the other two is that it has a lock-in period of 15 years while the others are locked up to superannuation age. Exemption can be claimed under Sec 80C upto Rs 1.5LPA. Loans can be availed on PPF account.

Trust this helped.

10 Likes

We didn’t expect this detailed explanation. Perfect! Thank you so much Vinod @vgulvady

We are going to use this article as a bookmark for the multiple times we get queries on these topics.

Thanks again :slight_smile:

4 Likes

Thank you for detailed explanation.

Here are a few more doubts - If any employee opts for VPF, then would there be any extra admin charges which would need to be paid to EPFO? If yes, how it is calculated. And who should bear this admin charges? Company or employee?

3 Likes

Hi Shefali,

As Administrative charges are calculate based on Basic and DA not on PF or VPF.

Therefore Company no need to pay any extra Admin charges for VPF amount which you will deduct from the Employees.

Trust this helped.

1 Like
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