PPF vs VPF: Public Provident Fund (PPF) and Voluntary Provident Fund (VPF) are two high yielding small savings schemes that are backed by the central government. These small savings schemes are risk-free as they are not exposed to stock market volatility. Hence, those individuals, who have low risk appetite, prefer to invest in PPF or VPF. Most importantly, they fetch income tax exemption too. According to tax and investment experts, an investment up to Rs 1.5 lakh per annum in PPF or VPF is free from any kind of income tax in a particular financial year under Section 80C of the Income Tax Act 1972.

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Speaking on the PPF vs VPF issue and which one is a better option for the investor to increase his money, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Those who are salaried and have PF or EPF account, Voluntary Provident Fund (VPF) is better as for VPF investment, you need an EPF account. PPF interest rate is 7.1 per cent and VPF interest rate is 8.5 per cent, which is same as the PF interest rate or EPF rate of interest. Since, both PPF and VPF investment is tax exempted under Section 80C of the Income Tax Act, if the investor is salaried and has EPF account, he should go for VPF instead of PPF."

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SEBI registered tax and investment expert Jitendra Solanki explained about who should go for PPF. He said, "Both PPF and VPF allow investors to claim income tax exemption on up to Rs 1.5 lakh investment in a particular financial year. If someone is self employed or a businessman, then he may not have an  EPF account. In that case, PPF account is a good tax-saving investment option. Those who are salaried, should go for VPF." 

Solanki added that both tax-saving options are designed for different sections of the earning community.

On how to get VPF, Solanki said that an employee can ask his recruiter to deduct some additional amount from his salary as monthly contribution in the form VPF. The recruiter will do that and the extra VPF amount will start accumulating in the EPF account.

Reminding investors about Rule 72 calculator, Solanki said that in small savings scheme, "If someone wants to know which risk-free scheme is better, then he or she can use the Rule 72 calculator and find out which one will double their money and also reveal time taken. It will help the earning individual to set long-term investment goal."
 
Rule 72 calculator suggests that VPF investment at current 8.5 per cent annual interest will double the money in 8.5 years while PPF at current 7.1 per cent annual interest rate will double the money in 10.11 years. So, if you are eligible for investing in VPF, it's better to avoid PPF.