VPF vs PPF- Understanding the Difference!

byPriyanka JuyalLast Updated: August 17, 2022
vpf vs pps
vpf vs pps

VPF vs PPF- Where to invest and what is the difference between them are some of the most frequently asked questions by investors. In many ways, investing in PPF is a good idea, while at other times, choosing VPF over PPF turns out to be a good deed.

Let us find the difference between both of them through their features, benefits, limitations and more.

Difference between VPF and PPF

Given below is the complete difference between VPF and PPF-

Who can investEmployees working in an organizationAny Indian resident
Employee’s contributionVoluntaryMinimum of Rs 500 and maximum of Rs 1.5 lakh
Lock-in periodUp to retirement or resignation15 years
Tax on maturityTax-freeNo tax
Premature withdrawalsFor medicinal purposes, marriage, repayment of the loan, unemployment of more than 2 months, etcAllowed after the completion of 6 financial years for medical or educational purpose
SchemeRetirement-cum savings schemeSavings scheme
Extension beyond maturityNot possiblePossible in the block of 5 years

What is PPF or Public Provident Fund?

A Public Provident Fund (PPF) account allows an individual to save a portion of his or her income each year in order to build a retirement corpus. PPF accounts provide interest on deposits as well as tax benefits. The PPF account was created primarily to encourage people’s saving habits, particularly those who do not belong to an Employee Provident Fund Organization (EPFO). Investing in a PPF account entitles an individual to tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.

What are the Benefits of a PPF Account?

Benefits of PPF account are-

  • The minimum deposit into a PPF account is Rs 500, and the maximum deposit is Rs 1.5 lakh
  • The interest on PPF balance is compounded yearly
  • PPF lock-in period is 15 years. The lock-in period makes it a good option for saving money
  • PPF accounts provide a tax deduction of up to Rs. 1.5 lakh
  • Partial withdrawal is allowed only after the completion of the 6th financial year
  • PPF tenure can be extended in the block of 5 years
  • Loans can be obtained from the PPF account

What are the Limitations of the PPF Account?

A few of the PPF account limitations are-

  • PPF accounts have a 15-year lock-in period, which becomes a problem if someone needs to withdraw money for an emergency or to meet financial obligations
  • There are certain rules and regulations that must be followed if the money is withdrawn before maturity
  • PPF interest rates are not competitive
  • Such accounts cannot be held jointly
  • Only Rs. 1.5 lakh can be deposited into a PPF account. Any amount in excess will be rejected
  • NRIs cannot open a PPF account
  • One cannot close a PPF account within 5 years of opening the account
  • PPF accounts can be closed only in the case of life-threatening illnesses, for which supporting documentation is required

Who can Open a PPF Account?

Listed below are the people who are eligible to open a PPF account-

  • Only Indian citizens
  • An Indian citizen settled abroad can continue operating his/her PPF account
  • Parents/guardians on behalf of their minor children can open a PPF account

*It is to be noted that joint accounts and multiple accounts are not allowed to be opened

What is VPF or Voluntary Provident Fund?

A VPF, or Voluntary Provident Fund, is another type of saving investment that allows an employee to save more money in addition to the mandatory deduction of 12% of the basic salary. It also refers to the extended retirement-cum savings scheme, in which an employee voluntarily contributes a portion of his or her salary to the EPF account.

The process to apply for VPF is easy. ll an employee needs to do is contact their organization’s HR department and request an additional contribution. The additional contribution will then be deducted from the employee’s salary and transferred to his or her EPF account.

What are the Benefits of a VPF Account?

The following are the advantages of a VPF account for employees:

  • The VPF account earns the same interest as the EPF scheme
  • The VPF account’s interest will be credited to the EPF account
  • VPF account holders can withdraw funds in installments
  • Loans against deposits are also possible under certain conditions
  • Withdrawals from a VPF account after 5 years are tax-free

What are the Limitations of a VPF Account?

Below are the limitations of a VPF account-

  • Salaried employees are eligible to open a VPF account
  • VPF has a 5-year lock-in period. Premature withdrawal of the entire amount prior to maturity is not permitted
  • Withdrawals will be subject to tax deductions if they are made before the fifth year
  • The government declares the interest rate on VPF on an annual basis, hence, there might be chances of fluctuations

Who can Open a VPF Account?

The people who can open a VPF account are as follows:

  • An employee of the company
  • He/she should work for a company with a workforce of more than 20 people.


Before deciding between VPF and PPF, it is a good idea to research the benefits, features, drawbacks, maturity period, and other details of each option. Apart from that, knowing your personal needs before selecting one is a good idea.

What is the maturity period of VPF?
The VPF maturity period is 5 years.
What is the maturity period of a PPF account?
The maturity period of a PPF account is 15 years.
Can I open a VPF account for my child?
VPF accounts are only meant for employees working in an organization of more than 20 people.
Can I prematurely withdraw an amount from the PPF account?
Premature withdrawal of money from the PPF account is allowed only under specific circumstances.

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