People don’t need to cross their 40s in order to start pre-planning their retirement planning. And if we see today’s world, it is normal to explore and dig into retirement plans from age 25. However, besides everything, we all need a better investment plan, which can help us in later life after investing in it. Therefore, today we people have much better investment options. And a few of them are ULIPs, Mutual Funds, Equity, NPS, Post office schemes, PPF, VPF, EPF Pension Plans, etc. Now, you must think there’s a lot to choose from, and it might confuse you.
That’s why to escape from being indecisive here; you have low-risk average return retirement options. And these promising ones are EPF and VPF for investment/retirement. But to make a choice between EPF vs VPF, you have to go through many aspects. For instance, EPF VS VPF Interest Rate, return, eligibility criteria, and tax benefits. And to easily make calculations, all you need is a VPF Tax Calculator and a combined EPF Vs VPF Calculator 2023. So let’s begin by knowing about them more precisely and briefly.
Introduction of EPF vs VPF
EPF stands for “Employee Provident Fund,” which is a provident fund. It is created to provide financial security and stability in later life or the future. Under this EPF working criteria, salaried employees save a fraction of their salaries every month. So that they can use it in the later part of their life or at the time of retirement. However, the salaried employee working organizations must be registered under the EPFO “Employees’ Provident fund Organization.”
Moreover, it has been seen that most employees have to contribute only 12% of their Basic + Dearness Allowance towards EPF. Remember, contributing EPF is applicable only if the organization has more than 20 employees, and the basic salary of all of them must be more than Rs. 6,291. The best is that it provides you interest on the saved amount. And it makes you eligible for a tax deduction with no risks, and best you can use it as an investment tool after retirement.
VPF stands for “Voluntary Provident Fund,” which is an employee availing VPF scheme. In the VPF, the employee can voluntarily contribute any amount of their salary to the Provident fund account. Remember, it is mandatory by the government that under VPF, your contribution should be more than the PF ceiling of 12%. But it is necessary to keep in mind to contribute an amount towards VPF under legal guidelines. Moreover, a salaried employee is allowed to contribute 100% of his basic salary and DA. Furthermore, you will find that both EPF VS VPF Interest Rates are the same. Remember, the EPF VS VPF Interest Rate amount would be credited to your EPF Scheme account.
Which one is Better: EPF vs VPF
Now, in order to make a comparison between both EPF VS VPF, you can easily find the suitable one for you. Moreover, the entire comparison is based on some significant factors such as contribution, eligibility, tax benefits, returns, withdrawal facility, etc. So let’s begin it:
When it comes to eligibility, unlike PPF, under EPF & VPF, only salaried employees belonging to an organization can avail of these schemes. Moreover, under VPF, contributing an amount of over 12% to their EPF account is necessary.
You will see the same level of contribution in both EPF and VPF. Another factor is that the employee should be salaried for both EPF and VPF schemes. Being an employee, you can increase your retirement savings by telling the employer to deduct a certain percentage. Ensure it should be more than 12% of your basic pay and dearness allowance. Moreover, a 100% basic pay and dearness allowance is needed for a contribution towards a VPF account(part of EPF). When it comes to the contribution, VPF has no such limit.
As per the current report, there is an interest rate of 8.7% on PPF accounts. However, it fluctuates within ten years as per the government guidelines. As a result, we usually get favorable results. Apart from it, the interest rate we can expect from VPF is generally not linked to G-bond yield. Plus, it is ordered the same as offered on EPF accounts. And particularly if we see EPF, it is slightly greater than the PPF rate. For instance, as per the financial year 2014-2015, EPF has fixed the rate at 8.75%.
There are some legal frameworks when it comes to concluding tax benefits in EPF vs VPF. In which the employee should have consistently served more than five years of service in an organization. Only then the maturity proceeds from EPF/VPF will become tax-exempt. The maturity returns will attract some tax if the employee quits before completing 5 years.
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