Small Saving Schemes Give the Investor A Plethora of Options. VPF Vs PPF: Which is A Viable Investment for Long-term Returns 2021?

Small saving schemes have become the highest yielding schemes for Indian middle-class families. The citizens today are adopting a more conservative approach towards savings and making prolific investments for securing their financial future. Referring to the ambiguities in deciding what’s the best form of investments, the investors might get perplexed between a plethora of choices.

Employees provident fund is one of the confining investments for the salaried persons, and it comes down to two primitive options; Public Provident Fund(PPF) And the Voluntary Provident Fund. There’s a multitude of choices available for the salaried persons, but in the case of all earning individuals, the choice is limited. Recently, a month ago, when the Finance Minister of India degraded the rates of small saving schemes, it sent vicious shockwaves across the fleet of investors. The impulses were however relieved after the sudden change of thoughts by the government to withdraw the proposed decline in rates. It could have hurt the sentiments of many saving-driven families.

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Instrumental Options in Small Saving Schemes

What is the more suitable option for securing funds is the question that a percentage of people ask the analysts and the experts. In response, the tax experts have come with a sure short and crisp answer. According to a statement released by Kartik Jhaveri, Director, Wealth Management at Transcend Consultants; if a person is employed then they have a viable option to opt for a Voluntary Provident Fund.

The composition of the VPF goes beyond the mandate contribution of 12 percent of one’s salary. The taxable income hypothesis plays a crucial role in deciding whether the salaried or the employed person wants to extend its contribution to EPF or PF account.

While jotting down the requisite information for selecting a contribution, the employed person should vary the prevailing interest rates. The previously recorded interest rates for the April-June Quarter 2021 states PPF interest at 7.1 percent, whereas EPF or PF stood at 8.5 percent. Kartik Jhaveri, on further divulging, said that the employed person should get reckoned with opting for the Voluntary Provident Fund as it yields the same level of interests compared to other small saving schemes.


The difference in the rates is a substantial factor that affects the amount of contribution in such schemes proposed by an individual. Annual returns with higher interests are generally preferable by the salaried person as they can opt for VPF. VPF gives a 1.4 percent higher return on a one-year basis than the PPF. The condescending factor in the scheme is that self-employed and businessmen have no other option to choose from, barring the PPF.

It makes their scope of returns limited while the salaried people get content with multiple choices. VPF comes with a revoking constraint where it states tax benefits for a financial year provided the EPF/PF coupled with the former contribution does not exceed the limit of Rs. 2.5 Lakh.

People opting for VPF to save income tax need to keep in mind the noteworthy points slated under Section 80C of the Income Tax Act. The benefit is extended up to a limit that too only if the mandate requirements are fulfilled by the salaried person. On the other hand, for so many years, the PPF has been the go-to fund for the taxpayers as it brings longevity and security in saving your future finances in better shape. The interest, however, has gushed due to the constant fragilities imposed by the government. So the new funds have become more intriguing options.

The tax saving net is a confounding way applied by many salaried to avail more deductions and exemptions listed under Section 80 C. VPF’s insulation from the tax net could also get indulged in the long-standing framework that includes the following other saving schemes; EPF/PF, ELSS mutual funds, and so on. SEBI authoritarian regime tax expert Jitendra Solanki asserted that the employed person should not be blindfolded by the aspect of higher interest rates and returns in the VPF.

One should vary the precautionary measures and then calculate how much they are deliberately willing to contribute as a substantial part of their incomes. The rationalization would only be taxable on the Public Provident Fund, EPF/PF only when the amount goes beyond Rs. 2.5 lakhs. So if the amount is any less or is exactly within the touching value, then it is not deemed to be taxable under Section 80 C. Just in case you want to know how much interest earned will be taxable, experts depict the hypothetical situation.

For instance, the interest earned by a salaried employee from the combined funds of EPF/PF along with VPF is a higher bid, then only the interests above the desired or the pre-evaluated estimation would be taxable rest all would be deductible. So if someone wants to go on with a voluntary contribution then VPF is considered a more realistic option.

small saving schemes

Although VPF requires a thorough understanding of the tax net and related terms, we have come up with our survey of how you can make the most of procuring your funds. But before that, let us catch up to the previous jabs in the small saving schemes. Keeping the fluctuations of rates per quarter in consideration, the rates are often slumped over the regulatory market rates, making it difficult to remove the redundancy of low returns.

People resort to losing their interests and look elsewhere for a better investment. Moreover, since the implementation of new policies by the Finance Ministry regularly, the flow of returns has stacked back substantially. Lowering rates demoralize the stability in the saving-oriented schemes. These complexions get sought to change in the VPF.

The facility of VPF will count as a huge step forward for the salaried persons. The vast majority of people in India in today’s time have started securing funds for their retirement plans. The other apprehension that gets validated while choosing your options is that the employer doesn’t have to contribute any amount to VPF. The whole responsibility for the VPF is on the taxpayer, just like the case on PPF.

Even contemplating on the contribution, the PPF allows a maximum investment of Rs 12,500 a month. Whereas on the other hand, there are no such constraints in the VPF. For the salaried person possessing the EPF/ PF account, it is advisable to bank on the VPF as it has better growth and returns prospects when compared to other forms of small saving schemes. In the purview of attaining long-term goals, both the policies have the same level of rationalism, but the eyes need to be wide open for subsequently parting with the income tax benefits.

Tanish Sachdev

Tanish seeks new opportunities as a professional content writer and writes on several fundamental topics like businesses and economics. The focal point remains on expressing opinions on critical aspects concerning the economy.

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