At present the interest on PPF is 7.1 per cent, while on VPF the interest is 8.25 per cent.
As the current fiscal year draws to a close on March 31, efforts to implement tax-saving strategies have intensified. Investing in appropriate instruments before March 31 can lead to significant tax savings. Among the viable options, considering investments in the Public Provident Fund (PPF) and Voluntary Provident Fund (VPF) stands out. Currently, PPF offers an interest rate of 7.1%, while VPF provides a higher interest rate of 8.25%. Let’s delve deeper into both options and compare them.
PPF is open to all Indian citizens, offering a straightforward avenue for investment. On the other hand, VPF is accessible only to salaried employees contributing to the Employees Provident Fund (EPF). VPF serves as an extension of the EPF account, allowing additional voluntary contributions beyond the mandatory 12% contribution. Notably, VPF is exclusively available to salaried individuals, while PPF welcomes both salaried and self-employed individuals.
Opening a PPF account requires a minimal deposit of Rs 100, with a mandatory minimum annual investment of Rs 500. The maximum annual investment limit for PPF stands at Rs 1,50,000. In contrast, VPF does not impose a minimum amount or annual investment limit. Investors can contribute up to 100% of their basic salary, combining EPF and VPF contributions.
The choice between VPF and PPF hinges on factors such as eligibility, personal preferences, and long-term financial objectives. For individuals focused on retirement planning, VPF presents an attractive option due to its higher interest rate, currently at 8.15%. In comparison, PPF offers an interest rate of 7.1%. Therefore, opting for VPF over PPF could potentially yield 1% more interest, enhancing overall returns.
As the financial year draws to a close, exploring tax-saving avenues like PPF and VPF can prove beneficial. While PPF caters to a broader investor base, VPF targets salaried individuals seeking enhanced returns, particularly for retirement planning. Assessing individual financial goals and risk tolerance is crucial in making an informed decision between these two investment options.
