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Employees Provident Fund (EPF), Public Provident Fund (PPF), Voluntary Provident Fund (VPF), and National Pension Scheme (NPS) are very popular for retirement savings because of their numerous features like low risk and tax benefits. However, being similar in nature, people often find it confusing to pick between them. Hence an analysis that compares and contrasts their features, benefits, and drawbacks is important.

EPF vs VFP vs PPF vs NPS:

Eligibility

EPF – It is open to salaried employees in India.
VPF – It is open to salaried employees in India.
PPF – It is open to anyone except NRIs (salaried or non-salaried)
NPS – It is open to all citizens of India.

Contribution

EPF –
Employee contribution: 12% of basic salary plus dearness allowance.
Employer contribution: Same 12% as employee (of the 12%, 8.33% goes towards pension, and 3.67% goes to EPF)
VPF –
Employee contribution: No fixed amount. However, it must be more than the 12% required for EPF.
Employer contribution: The employer is not obligated to contribute anything.
PPF –
Investor contribution: Minimum of Rs.500 to maximum of Rs.1,50,000 in one financial year.
Employer contribution: Nil.
NPS –
Employee contribution: Minimum of Rs.6000 per year. There’s no maximum limit.
Employer contribution: Nil.

Investment Period

EPF – Up to retirement or resignation (whichever is earlier).
VPF – Up to retirement or resignation (whichever is earlier).
PPF – 15 years (You can extend it in blocks of 5 years.)
NPS – Up to retirement (contribution not allowed post the age of 60).

Interest Rate

EPF – 8.65% (It is decided for each financial year by the Government of India.)
VPF – 8.65% (same as EPF interest rate)
PPF – 8.10%
NPS – No fixed interest rates. They vary between 12% to 14% based on the scheme chosen by the individual.

Tax Benefits

• EPF –
  • Tax benefit on investment: Up to Rs.1 Lakh per year under Sec 80C.
  • Tax benefit on maturity: Maturity amount is exempt from tax after continuous service of 5 or more years.
• VPF –
  • Tax benefit on investment: Up to Rs.1 Lakh per year under Sec 80C.
  • Tax benefit on maturity: Maturity amount is exempt from tax after continuous service of 5 or more years.
• PPF –
  • Tax benefit on investment: Up to Rs. 1.5 Lakh per year under Sec 80C.
  • Tax benefit on maturity: Maturity amount is exempt from tax.
• NPS –
  • Tax benefit on investment: Up to Rs. 1.5 Lakh per year under Sec 80C, Rs 50,000 under Section 80C(1B), this benefit and over and above 1.5 Lakh. Hence, maximum tax benefit Rs 2 Lakhs.
  • Tax benefit on maturity: The amount used to purchase annuity is not taxed. However, annuity income is taxed in the year of receipt. Lump-sum withdrawal in excess of 40% is taxable.

Withdrawal Facilities

EPF – You can make complete or partial withdrawals for specific purposes subject to certain rules. Withdrawals made before completing 5 years of continuous service are taxable.
VPF – You can make complete or partial withdrawals for specific purposes subject to certain rules. Withdrawals made before completing 5 years of continuous service are taxable.
PPF – Partial withdrawals are allowed from the 7th year.
NPS – The withdrawal rules are very rigid. You can withdraw only 20% before retirement.

Loan Facilities

EPF – Loan facilities are available.
VPF – Loan facilities are available.
PPF – You can take loans against the balance in your account between the 3rd and 6th financial year.
NPS – No loan facility available.

Purchase of Annuity

EPF – Not mandatory.
VPF – Not mandatory.
PPF – Not mandatory.
NPS – Mandatory, because it is a pension scheme.

Conclusion

• EPF and VPF are good options for salaried employees. They offer safe investments with sufficient liquidity. EPF is mandatory for most salaried employees.
• VPF offers the opportunity to invest greater amounts than EPF.
• PPF is a good option for non-salaried people. It is a safe, long-term investment.
• NPS offers higher returns but very little liquidity. Hence it is good for people who lack investment discipline.

Study all the pros and cons of each scheme carefully. And keep in mind your particular requirements.

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