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Which is better for you, the Voluntary Provident Fund (VPF) or the Public Provident Fund (PPF)?

Two well-known government-sponsored programs for long-term savings and retirement planning by Pro Legal HR Payroll Companies in India by PF ESI Consultant in Ahmedabad India are the Voluntary Provident Fund (VPF) and the Public Provident Fund (PPF). Both have appealing qualities, but they serve different demographics and vary significantly in terms of eligibility, contribution limits, tax advantages, and exit flexibility. In general, people are unsure about which option to choose in order to maximize interest and avoid taxes. To assist you choose which of these provident fund plans best suits your financial goals, let's examine the distinctions between them.

Voluntary Provident Fund: What Is It?

An expansion of the Employee Provident Fund (EPF) program in India, the Voluntary Provident Fund (VPF) allows workers to make contributions to their EPF accounts in excess of the required minimum. It permits workers to voluntarily contribute more to their EPF than the government-imposed statutory maximum.

Features of VPF Tax Benefits: Under Section 80C of the Income Tax Act, workers may deduct up to Rs. 1.5 lakh from their taxable income each year for VPF payments, just as they can for EPF contributions.

Same Interest Rate: VPF donations are eligible for the same interest rate as EPF contributions. This interest rate is set by the government and is often greater than what is provided by the majority of other fixed-income assets.

Employer's Contribution: Although the VPF is a voluntary program, companies are not required to match their workers' extra contributions. Nonetheless, some businesses can decide to include matching VPF payments in their benefits package for staff members.

Safety and Security: Because both are overseen by the Employees' Provident Fund Organization (EPFO) and supported by the government, VPF donations are just as safe and secure as EPF payments.

Lock-in duration: VPF has a five-year lock-in duration. The accrued VPF corpus cannot be withdrawn by employees until this time has passed. According to VPF withdrawal regulations, if an individual decides to withdraw all or a portion of their money before the five-year period has passed, they will be taxed.

Flexible Contribution Amount: The maximum amount that an employee may contribute to the VPF is unlimited. However, the sum of the employer's and employee's contributions to the EPF and VPF cannot be more than 100% of the worker's base pay and dearness allowance. Pro Legal HR Payroll Companies in India by PF ESI Consultant in Ahmedabad.