VPF vs PPF- Understanding the Difference!

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.

What is PPF or Public Provident Fund

A Public Provident Fund or PPF account allows an individual to save a part of his/her income annually to build a retirement corpus. PPF account offers interest on the deposited amount along with the tax-saving benefits too. The PPF account was basically introduced to encourage the saving habits of people, especially of those who don’t come under the Employee Provident Fund Organisation (EPFO). Investing in a PPF account allows an individual to claim 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 amount to deposit in a PPF account is Rs. 500 only, whereas the maximum amount 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 to save a good amount of money
  • PPF account offers 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 availed from the PPF account

What are the Limitations of the PPF Account?

A few of the PPF account limitations are-

  • PPF account comes with a lock-in period of 15 years, which becomes a problem in case somebody wants to withdraw money for an emergency purpose or to meet financial requirements
  • If one wants to withdraw the amount before maturity, there are certain rules & regulations to be followed
  • PPF does not offer competitive interest rates
  • Such accounts cannot be jointly held
  • The maximum amount that can be contributed to the PPF account is Rs. 1.5 lakh only. Amount more than that will automatically get rejected
  • NRIs cannot open a PPF account
  • One cannot close a PPF account within 5 years of opening the account
  • PPF accounts can only be closed in case of life-threatening ailments for which supporting documents are required to support such claims

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?

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

The process to apply for VPF is easy. All an employee requires is to connect with their organization’s HR department to raise a request for an additional contribution. From thereon, the additional contribution will be deducted from the employee’s salary and will be transferred to his/her EPF account.

What are the benefits of a VPF account?

Following are the benefits of VPF account for the employees-

  • The interest offered on the VPF account is the same as the EPF scheme
  • The interest earned on the VPF account will be credited to the EPF account
  • VPF account holders are given the flexibility to withdraw money partially
  • Loan against the deposit is also possible under certain conditions
  • Withdrawals made from the VPF account after the completion of 5 years are subject to tax exemptions

What are the limitations of a VPF account?

Below are the limitations of a VPF account-

  • Salaried employees can open a VPF account
  • VPF has a lock-in period of 5 years. Premature withdrawal of the complete amount before maturity is not allowed
  • Withdrawals will be subject to tax deductions if the amount is withdrawn before 5 years
  • Interest offered on VPF is declared by the government annually, hence, there might be chances of fluctuations

Who can open a VPF account?

Listed below are the people who can open a VPF account-

  • An employee in the organization
  • he/she should be an employee of an organization with a workforce of more than 20 people

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


Before choosing VPF or PPF, it is wise to go through the benefits, features, drawbacks, maturity period and more about both the options available. Apart from that, it is good to know your personal requirements before choosing one.

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.
You May Also Like