PPF vs VPF: Which is best for attaining long-term funding aim?
PPF vs VPF: Public Provident Fund (PPF) is among the highest yielding small saving schemes after the Provident Fund (PF) or Employee Provident Fund (EPF). Currently, for April to June 2021 quarter, PPF rate of interest is 7.1 per cent whereas EPF or PF rate of interest is 8.5 per cent. But, PPF is obtainable for all incomes particular person whereas PF or EPF is obtainable just for salaried class. According to tax and funding consultants, if an individual is employed, then they’ve an choice to go for Voluntary Provident Fund (VPF), which is past obligatory contribution of 12 per cent of 1’s primary wage. However, whereas deciding the voluntary contribution in EPF or PF account, one must remember the fact that curiosity earned on EPF or PF contribution past ₹2.5 lakh every year is taxable.
Speaking on PPF vs VPF Kartik Jhaveri, Director — Wealth Management at Transcend Consultants stated, “If a person is an employee, then I would recommend him or her to opt for the Voluntary Provident Fund or VPF as it yields in sync with the PF/EPF interest rate, which is currently 8.5 per cent. If we compare it with the PPF interest rate of 7.1 per cent, then it makes a huge difference of 1.4 per cent on one’s annual return. However, if a person is self employed, businessman, etc. then he or she has no choice but to go for the PPF.”
Jhaveri stated that each PPF and VPF present similar earnings tax profit supplied the EPF/PF plus VPF contribution isn’t greater than ₹2.5 lakh in a specific monetary yr.
On how you can maintain one’s VPF insulated from the earnings tax internet SEBI registered tax and funding professional Jitendra Solanki stated, “While opting for the VPF, one must note that Section 80C benefit is available up to ₹1.5 lakh annual investment only and it includes all other investment options like mandatory PF/EPF contribution, LIC premium payment, home loan interest repayment, ELSS mutual fund etc. So, one must calculate how much he or she can contribute in VPF if they are doing this to save income tax.”
Solanki additionally stated that after the rationalisation of Provident Fund (PF), PF/EPF curiosity earned on contribution past ₹2.5 lakh in a specific yr is taxable. So, if the PF/EPF contribution together with the VPF turns into ₹2.5 lakh every year, then the PF/EPF curiosity earned is not going to be taxable however the Section 80C profit might be out there as much as ₹1.5 lakh funding solely. However, within the case of PF/EPF contribution together with VPF grow to be greater than ₹2.5 lakh in single monetary yr, in that case EPF/PF curiosity earned above ₹2.5 lakh might be taxable whereas Section 80C profit might be out there on the similar ₹1.5 lakh every year restrict.
On how you can benefit from this VPF facility for a salaried taxpayer, Kartik Jhaveri stated, “When one has EPF/PF account, then rather opening a PPF account, one should go for the VPF as it gives 1.4 per cent more annual return which will make big difference in achieving one’s long-term investment goal but at the same time one needs to keep an eye on the income tax rationalisation if they want to keep the EEE benefit intact in the EPF or PF investment, interest earned and the maturity amount.”
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