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What is the Difference Between EPF, VPF, and PPF? What are Their Tax Benefits?

EPF, PPF, and VPF offer consistent returns and are quite safe. These programs are, therefore, the best long-term savings objectives for retirement.

  • 5,242 Views | Updated on: May 10, 2024

Today, retirement planning is one of the major concerns among the youth. The increasing popularity of various retirement schemes and plans is a testament that retirement planning is a hot investment topic for the working youth. It is a smart decision to plan your retirement at the beginning of your career to gain the maximum out of the retirement plans. However, the market offering a heap of retirement plans generally confuses the individual trying to opt for one.

You have plans like Mutual Funds, Equity, National Pension System, Unit Linked Insurance Plans, Public Provident Funds, Employees’ Provident Fund Organisations, Voluntary Provident Funds, Post Office Schemes, etc., among many other luring options. But for those who are at the beginning of their career, choosing the right option for such a long term can be very tricky. And before a young adult opts for one of these, they must be well-informed and well-prepared to make the right choice and pick the most suitable plan for their future.

One of the most confusing tasks is understanding the comparison: EPF vs. PPF vs. VPF. But fret not; this article will tell you all about PPF vs. VPF vs. EPF and how they differ from one another.

EPF vs. VPF vs. PPF | Definition and Working

1. Employee Provident Fund (EPF)

EPF is a provident fund created to provide financial stability and security to the employees of an organization in the long term, i.e., after retirement. As per the norms of this fund, employees can save a fraction of their basic salary each month. This fund can then be used by the employees later in their retirement.

As per the government regulations, it is mandatory for all working employees of organizations registered under EPFO (Employees’ Provident Fund Organization) to contribute as much as 12% of their basic + DA (Dearness allowance) or as much as ₹780/- towards the EPF. In addition to this, as soon as the employee deposits their contribution, the employer is liable to add the same amount to his EPF account.

EPF = 12% of basic from employee income + Employer contribution (12% of employees’ basic)

For organizations having more than 20 full-time employees, it is mandatory to participate in EPF. Other regulations are important, too, and must be read about. In addition to this, there are tax benefits linked to EPF, and they also earn you a decent interest and are a completely risk-free investment tool.

2. Voluntary Provident Fund (VPF)

In this type of Provident Fund, the applicant can voluntarily contribute any percentage of their salary to the fund account as per their wish. However, the PF contribution must be above the minimal 12% ceiling as per the government’s mandate.

The contribution in VPF is not obligated as it depends on the employee’s discretion. However, the interest offered would be the same as the EPF decided by the governing body and will be credited into the EPF account at maturity.

3. Public Provident Fund (PPF)

This is the PF scheme for the common person! Backed by the government, anyone working or non-working can invest in PPF. It is one of India’s most popular traditional savings schemes, which offers good returns, tax benefits, and safety. The main goal of the PPF is to help individuals make small savings and earn decent interest in them.

One can opt for the PPF schemes at any bank or post office. You can make small deposits of less than ₹500/- per annum to ₹1,50,000/- per annum.

Difference between VPF and PPF and EPF

Here are some of the key differences between EPF, PPF, and VPF, based on important criteria:




Interest Rate

8.75% per annum

8.75% per annum

8.7% per annum

Tax Benefit

Deductions of up to ₹1.5 lakhs per year under Sec 80C of IT Act

Deductions of up to ₹1.5 lakhs per year under Sec 80C of IT Act

Deductions of up to ₹1.5 lakhs per year under Sec 80C of IT Act

Period of Investment

Retirement/ Resignation whichever is earlier

Retirement/ Resignation whichever is earlier

15 years

Loan Availability

Partial withdrawals allowed


After 6 years allows 50% withdrawal

Employer Contribution on Basic + DA




Employee Contribution on Basic + DA




Taxation on Maturity Returns




Points to Remember While Choosing to Invest in VPF, EPF and PPF

In addition to the variations between VPF, EPF, and PPF, you should consider the following criteria to maximize the benefit from your contributions.

1. To contribute to the Public Provident Fund, individuals can open a PPF account at a bank or post office.

2. Returns may vary depending on the market because the yield on 10-year government bonds affects the PPF interest rate. However, there is no relationship between the interest rates of EPF and VPF and government-yield bonds.

3. For employees who have continuously worked for the company for five years, the maturity funds from the EPF and VPF are tax-free. One of the key differences between the two investment vehicles is that PPF returns are tax-free.

Which Savings Option Is the Best Among EPF, VPF, and PPF?

1. While EPF, VPF, and PPF each have distinctive features of their own, let’s examine which one is ideal for you according to your circumstances.

2. To contribute to the Public Provident Fund, individuals can open a PPF account at a bank or post office.

3. The Voluntary Provident Fund (VPF) appears to be the finest investment vehicle, despite Employee Provident Fund (EPF) being the only one of the three that is required in India.

4. The highest interest rate and EEE (exempt-exempt-exempt) tax benefits, similar to EPF, are offered by VPF. Additionally, you may rely on guaranteed returns. This program is available to people looking for long-term investing solutions with lower risk.

5. Only salaried staff, though, are permitted to invest in this program. The Public Provident Fund (PPF) is a desirable choice for those without salaries in this regard. However, it, too, has a drawback. PPF contributions from individuals are limited to ₹1.5 lakh rupees each year.

6. PPF and VPF are fixed-income investment vehicles with tax-free returns, so if you work as a salaried employee and earn a higher salary, you can choose to participate in both programs.

7. Therefore, before beginning your investment journey for a hassle-free post-retirement existence, it is perfect for acquiring comprehensive information regarding EPF vs. VPF vs. PPF.


Each plan brings along its share of pros and cons. Having understood the nitty-gritty of each scheme, you can prudently determine your retirement needs and opt for a plan that best aligns with your future goals.


1. How much amount can I withdraw from my EPF account before retirement?

The new regulations provide that holders of PF accounts may withdraw up to 75% of their net PF or EPF account balance or an amount equal to three months’ worth of their basic pay + dearness allowance, whichever is less. We’ll consider this to be a non-refundable deposit. You can file these withdrawal claims online.

2. If I resign from my job, what will happen to my VPF investment?

The ultimate maturity sum is given to employees after they leave their position or retire. The nominee may take ownership of the accrued funds in the VPF account in the event of the account holder’s untimely death.

3. Can I carry my PPF investment after 15 years?

A PPF account holder can continue his/her account after maturity without making any further deposits. The account can be continued for any period. The PPF account will continue to earn interest rates applicable to the scheme.

    Key Takeaways

  • A PPF account can be opened by self-employed individuals and those engaged in unorganized industries, whereas a VPF account is exclusively intended for salaried employees.
  • The interest rate on a VPF account is 8.5%, the same as the interest rate on an EPF account. A PPF account, on the other hand, offers 7.1% of your money.
  • PPF account returns are not subject to income tax. On the other hand, under Section 80C of the Indian Income Tax Act, 1961, payments made to a VPF account are eligible for a tax deduction.
  • A PPF account’s deposit cannot be withdrawn until the account has reached maturity. A PPF account has a maturity duration of 15 years. Employers can, however, withdraw money from VPF accounts whenever they need to cover their financial obligations. However, the sum will be taxed if an employee withdraws money from a VPF account before the account has been open for five years.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors