Current Interest Rate (2024)
For: Everyone (Salaried & Self-Employed)
Current Interest Rate (2024)
For: Salaried Employees Only
Same as EPF Rate
For: EPF Members Only
What Are Provident Funds and Why They Matter?
In India, provident funds are government-backed savings schemes designed to help you build long-term wealth while saving taxes. Think of them as super-charged savings accounts with better interest rates and tax benefits.
Three main types confuse most people: PPF, EPF, and VPF. All three sound similar but serve different purposes. Choosing the right one can mean lakhs of rupees difference in your retirement corpus.
All three offer EEE (Exempt-Exempt-Exempt) status: No tax on investment, interest, or withdrawal.
Your money is 100% safe with sovereign guarantee. No market risks like stocks or mutual funds.
Designed for 15+ year horizons to build substantial retirement corpus through compounding.
Public Provident Fund (PPF) Explained
What is PPF?
PPF is a long-term savings scheme available to all Indian residents. You can open a PPF account in banks or post offices. It has a 15-year lock-in period, but you can extend in blocks of 5 years.
- Open to everyone: Salaried, self-employed, students, homemakers
- Tax-free returns: EEE status under Section 80C
- Minimum investment: Just ₹500 per year
- Maximum investment: ₹1.5 lakhs per year
- Loan facility: Available from 3rd to 6th year
- Partial withdrawal: Allowed from 7th year
- Nomination facility: Secure for family
- Long lock-in: 15 years minimum
- Limited liquidity: Only one partial withdrawal per year
- Fixed interest: Government decides rates quarterly
- Lower returns: 7.1% may not beat inflation long-term
- Account limit: One account per person (except for minors)
- No premature closure: Only in specific situations
Who Should Choose PPF?
Best for: Self-employed professionals, business owners, homemakers, students, and anyone without EPF access. Also good for conservative investors who want guaranteed returns.
Employee Provident Fund (EPF) Explained
What is EPF?
EPF is a mandatory retirement savings scheme for salaried employees in organizations with 20+ employees. Both employee and employer contribute 12% of basic salary each month.
- Higher interest rate: 8.25% (vs 7.1% in PPF)
- Free employer contribution: 12% from employer is extra savings
- Tax benefits: EEE status under Section 80C
- Pension benefits: EPS (Employee Pension Scheme) included
- Early withdrawals allowed: For marriage, education, medical, home purchase
- Portable: Transferable when changing jobs
- No maximum limit: Based on your salary
- Only for salaried: Not available to self-employed
- Employer dependent: Requires employer cooperation
- Withdrawal restrictions: Tax on early withdrawal before 5 years
- Administrative issues: Sometimes delayed contributions
- Lower pension returns: EPS gives fixed pension only
- PF withdrawal process: Can be slow and bureaucratic
Who Should Choose EPF?
Mandatory for salaried employees in eligible organizations. If you have EPF, it should be your primary retirement savings vehicle due to higher returns and employer contribution.
Voluntary Provident Fund (VPF) Explained
What is VPF?
VPF is the voluntary version of EPF. If you have EPF, you can contribute extra money beyond the mandatory 12%. This extra contribution earns the same interest rate as EPF (8.25%).
- Higher interest: Same 8.25% as EPF
- No upper limit: Contribute up to 100% of basic salary
- Same tax benefits: EEE status like EPF
- Seamless integration: Same EPF account, no new account needed
- No extra paperwork: Simple employer request
- Better than PPF: Higher returns with same safety
- Automatic deduction: Salary deduction ensures discipline
- EPF required: Must have EPF account first
- Employer cooperation needed: Need to inform HR
- Lock-in period: Same as EPF withdrawal rules
- Lower liquidity: Withdrawal rules similar to EPF
- Not widely known: Many employees don’t use this option
- No employer contribution: Only your own money grows
Who Should Choose VPF?
Best for salaried employees with EPF who want to save more than 12% of basic salary. Excellent alternative to PPF for those eligible, due to higher interest rates.
PPF vs EPF vs VPF: Complete Comparison Table
| Feature | PPF | EPF | VPF |
|---|---|---|---|
| Eligibility | All Indian residents | Salaried employees only | EPF members only |
| Interest Rate (2024) | 7.1% | 8.25% | 8.25% |
| Minimum Investment | ₹500/year | 12% of basic salary | No minimum (voluntary) |
| Maximum Investment | ₹1.5 lakhs/year | 12% of basic (max ₹15,000/month) | 100% of basic salary |
| Tax Benefit | EEE (Tax-free) | EEE (Tax-free) | EEE (Tax-free) |
| Lock-in Period | 15 years | Until retirement or job change | Same as EPF |
| Employer Contribution | No | Yes (12% matching) | No |
| Loan Facility | Yes (3rd-6th year) | Yes (after specific period) | Same as EPF |
| Partial Withdrawal | Yes (from 7th year) | Yes (specific purposes) | Same as EPF |
| Risk Level | Zero (Govt backed) | Zero (Govt backed) | Zero (Govt backed) |
Provident Fund Calculator
Your Investment Growth
Total Investment: ₹0
Interest Earned: ₹0
Effective Annual Return: 0%
Which Provident Fund Should You Choose?
🏢 For Salaried Employees (with EPF):
Step 1: Maximize EPF first (12% of basic salary) – Get free employer money
Step 2: If you can save more, choose VPF over PPF (higher 8.25% interest)
Step 3: Only consider PPF if you’ve maxed out VPF and need more tax saving
👨💼 For Self-Employed / Business Owners:
Only option: PPF (since EPF/VPF not available)
Strategy: Max out ₹1.5 lakhs per year for tax saving under 80C
Alternative: Consider NPS for additional ₹50,000 tax saving
👩💼 For Homemakers / Students:
Primary choice: PPF (easy to open, low ₹500 minimum)
Strategy: Start early, even with small amounts, benefit from compounding
Additional: Consider Sukanya Samriddhi for girl child
Frequently Asked Questions (FAQs)
Yes, absolutely! You can have both PPF and EPF accounts simultaneously. In fact, this is a smart strategy:
- EPF: For your mandatory retirement savings from salary
- PPF: For additional voluntary savings (especially if self-employed spouse/family members)
- Tax benefit: Both qualify under Section 80C (combined limit ₹1.5 lakhs)
EPF gives higher returns (8.25% vs 7.1%). However, consider these factors:
| EPF Advantage | PPF Advantage |
|---|---|
| Higher interest rate | Open to everyone |
| Employer contribution | No employer dependency |
| No maximum limit | Easy partial withdrawals |
Simple process: VPF is just additional contribution to your existing EPF account.
Steps:
- Inform your HR/Finance department in writing
- Specify the additional percentage or amount from basic salary
- Submit VPF deduction request form (provided by employer)
- The extra amount will be deducted from salary and added to EPF
- No separate account – appears in same EPF statement
Note: You can start, stop, or change VPF contribution anytime.
You have three options:
Option 1: Transfer to new employer (Recommended)
• Fill Form 13 online through EPFO portal
• Seamless transfer maintains continuity
• Interest continues without break
Option 2: Withdraw partially
• Can withdraw if unemployed for 2+ months
• TDS applies if withdrawn before 5 years
• Loses compounding benefits
Option 3: Keep with previous employer
• Account becomes inactive but earns interest
• Can transfer later when convenient
• Manage through UAN portal
Yes, but with conditions:
Partial Withdrawal (From 7th year onwards):
• Maximum 50% of balance at end of 4th preceding year
• Or 50% of balance at end of preceding year (whichever is lower)
• Allowed once per financial year
Premature Closure (Allowed in specific cases):
• Life-threatening disease of account holder/family
• Higher education of account holder/children
• Change in residency status (NRI)
• Interest rate drops by 2% or more
• Requires proof and bank approval
Both are equal for tax saving (EEE status), but VPF has advantages:
| VPF Benefits | PPF Benefits |
|---|---|
| Higher interest (8.25% vs 7.1%) | Open to all |
| No upper limit (vs ₹1.5L in PPF) | Independent account |
| Salary deduction (auto-save) | Flexible contributions |
Verdict: If eligible for VPF (have EPF), choose VPF over PPF for better returns.
For PPF Balance:
- Net Banking: Login to your bank’s net banking
- Mobile Banking: Check through bank’s app
- Passbook: Update at bank branch or ATM
- SMS/Email: Some banks send statements
For EPF/VPF Balance:
- EPFO Portal: epfindia.gov.in (need UAN)
- UMANG App: Government app for EPF services
- Missed Call: 011-22901406 from registered mobile
- SMS: EPFOHO UAN ENG to 7738299899
Ready to Start Your Provident Fund Journey?
Remember: The best time to start was yesterday. The second-best time is today.
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