PPF and VPF can be one of the best medium for saving and investing for the salaried people. By investing in both these ways, you can also save better and you also get the benefit of higher interest rate.
PPF and VPF have always been the best means of investment for the employed people. By investing in both these ways, you can also save better and you also get the benefit of higher interest rate. It has been seen for some time that the interest rates on fixed deposits have come down significantly, due to which people are investing more in other investment instruments. So let us know in detail about PPF and VPF.
Voluntary Provident Fund (VPF)
Apart from investing in PPF, salaried people can also invest in Voluntary Provident Fund i.e. VPF. Only those salaried employees who are members of EPFO can invest in VPF scheme. Under EPF, no salaried employee can invest more than 12 percent of his basic salary. If an employee has to invest more than 12 percent of his basic salary, then he can invest through VPF.
At present, the interest rate on VPF is 8.50 percent, which is higher than the interest rate available on PPF. Apart from this, even under investment in VPF, you get the benefit of tax exemption under section 80C of the Income Tax Act. Just as PPF has the facility of EEE status, VPF also gets EEE status. EEE means that, there is no tax on investment amount, interest amount and maturity amount.
Public Provident Fund has always been the most preferred mode of investment for working people. PPF was introduced in 1968 as a savings method by the National Savings Institute, a part of the Ministry of Finance. By investing through PPF, people not only get tax benefits but also get the benefit of better interest rate. To keep your account running in PPF, you have to invest at least Rs 500 every year.
Along with this, you can invest a maximum of 1.5 lakh rupees through PPF in a year. PPF account comes with a lock-in period of 15 years. At present, the interest rate of 7.1 percent per annum is available in PPF. There is no tax on the interest earned under PPF. By investing in PPF, employed people also get the benefit of income tax exemption of up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act 1961.
