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Home >Money >Personal Finance >PPF vs VPF: Why should you increase your voluntary provident fund contribution

NEW DELHI : If you are investing in Public Provident Fund (PPF) to save tax under Section 80C, then you might be overlooking the comparative advantage of Voluntary Provident Fund (VPF) which provides the same tax benefit and safety but with more returns.

The Employees’ Provident Fund Organisation (EPFO) had hiked EPF interest rate to 8.65% for the last financial year 2018-19. VPF rate matches that of EPF as it is deducted from your salary, only if you want it to.

Now compare it with that of PPF, a more popular investment option. The interest rate of PPF for the first quarter of the current financial year 2019-20, starting from 1 April, 2019 to 30 June, 2019 has been fixed at 8%.

If the EPFO retains the interest rate of 8.65% for this financial year too, then as compared to PPF, VPF will fetch you an additional return of 65 basis points. However, PPF rates are revised quarterly but VPF/EPF rates are revised annually at the end of the financial year. An analysis of interest rates shows VPF has always given a higher interest rate than that of PPF.

2017-18: The VPF/EPF interest rate was 8.55% while the PPF rate varied between 7.6% and 7.9%

2016-17: The VPF/EPF interest rate was 8.65% while the PPF rate varied between 8% and 8.1%

2015-16: The VPF/EPF interest rate was 8.8% while the PPF rate was 8.7%

2014-15: The VPF/EPF interest rate was 8.75% while the PPF rate was 8.7%

2013-14: The VPF/EPF interest rate was 8.75% while the PPF rate was 8.7%

The difference between the two has increased over the years in favour of the VPF, which makes it a better investment choice than PPF.

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