Public Provident Fund (PPF) vs Voluntary Provident Fund (VPF)

Learn about VPF vs PPF. Understand what they are, how they differ, and which one to choose.

Choosing the right retirement savings option is crucial for your financial future. Both the Public Provident Fund (PPF) and Voluntary Provident Fund (VPF) offer tax benefits and help build a secure corpus, but they differ in features, eligibility, and returns. PPF is a traditional investment method and remains quite popular in India. It is ideal for you if you are looking to save on taxes while planning for retirement.

While PPF is a government-backed scheme suitable for all investors, VPF is an extension of the Employees’ Provident Fund (EPF) designed for salaried employees seeking higher contributions. 

Before investing your hard-earned money, you need to understand the key differences between PPF and VPF to make an informed decision.

The PPF scheme provides a long-term investment opportunity with attractive, tax-free interest earnings. It enables you to build a secure financial future after retirement. At the same time, you gain the benefits of tax savings.

Under this scheme, you, as an investor, can claim deductions on annual contributions under Section 80C of the Income Tax Act, 1961. A PPF account offers several features designed to enhance the security of your long-term investment. The key features include:

• Deposit Range: You can invest between ₹500 and ₹1.5 Lakhs per financial year

• Loan Facility: You have the option to secure a loan against your balance from the 3rd to the 6th year

• Withdrawals: You are allowed one partial withdrawal per year after completing the blockage period of 5 years

• Maturity Extension: You can extend your account in 5-year blocks and continue deposits after maturity

• Tax Deduction: You can claim deductions under Section 80C of the Income Tax Act

• Tax-Free Returns: You earn tax-free interest under Section 10

The VPF is an optional extension of the Employees’ Provident Fund (EPF). You can contribute more than the mandatory 12% of your basic salary towards retirement savings. While you may increase your contribution, your employer will continue to contribute a fixed amount at the standard EPF rate.

Some of the key features of the VPF scheme are:

• Eligibility: It is available only for salaried individuals working in organisations with 20 or more employees.

• Contribution: You can voluntarily contribute beyond the 12% EPF limit.

• Tax Benefits: Contributions up to ₹1.5 Lakhs qualify for deduction under Section 80C.

• Investment Process: You need to submit a registration form to the HR department; the amount will be directly deducted from your salary.

• Lock-in Period: Contributions remain locked in until retirement or unemployment (exceeding two months), except under specified withdrawal conditions.

Here is a concise comparison table of the VPF vs PPF:

Note: The aforementioned details hold true as of June 2025 and are subject to change.

Choosing between these two can be confusing. However, there are a few points you can consider to make the process easier and find a suitable option for you:

• Evaluate your employment status, as VPF is only available to working professionals employed in an organisation with 20 or more employees.

• VPF does not have any contribution limit, whereas PPF has a maximum annual limit of ₹1.5 Lakhs. Therefore, if you are seeking a flexible contribution amount, you may find VPF more suitable.

• VPF allows you to access part of your savings before the maturity period, making it suitable if you require liquidity sooner.

Both PPF and VPF serve effectively as long-term savings options. To invest wisely for retirement, you need to assess your financial stability, liquidity needs, and withdrawal plans. These factors help align your investment decisions with your long-term retirement goals.