Before investing in VPF and GPF, know its advantages and disadvantages, there will be no loss:

News India Live, Digital Desk: Saving Money: Various investment options are available for working people to secure their retirement and future. Of these, VPF (Voluntary Provident Fund) and GPF (General Provident Fund) are two such names which are often heard. Although both are provident fund schemes, there is a difference in their nature, eligibility and some other important aspects. Let us understand both of these in detail:

1. VPF (Voluntary Provident Fund):

• What is? VPF is a voluntary investment scheme for employees who are members of the Employees’ Provident Fund (EPF). In this, employees can deposit more than 12% of their basic salary and dearness allowance (DA) in their PF account as per their wish.
• Who can invest? Private sector and some public sector employees who come under the purview of EPF can invest in VPF.
• Advantages:
  • Better Returns: Generally the interest rate is similar to EPF, which is higher than FD.
  • Tax Saving: The amount invested in this gets tax exemption under Section 80C of the Income Tax Act.
  • Safe Investment: This is a safe and government supported scheme, in which the risk is negligible.
  • resilience: Employees can increase or decrease their VPF contribution amount anytime as per their wish.

2. GPF (General Provident Fund):

• What is? GPF is a provident fund scheme exclusively for government employees in India. It is designed to ensure financial security after their retirement.
• Who can invest? Only government employees (both central and state) can invest in GPF. Private sector employees cannot invest in it.
• Advantages:
  • Safe and Necessary: This is a mandatory savings scheme for government employees, which is very safe.
  • Fixed Interest: The interest rate is determined by the government, which is often similar to that of EPF and VPF.
  • Tax Saving: Tax exemption is available on the amount deposited in this under Section 80C of the Income Tax Act.
  • Loans and Partial Withdrawals: Employees can take loan or make partial withdrawal from their GPF account under certain conditions.

Main differences between VPF and GPF:

• Eligibility: VPF is for private/public sector employees (who are covered under EPF), while GPF is only for government employees.
• Mandatory vs Voluntary: GPF may be part of the mandatory savings scheme for government employees, while VPF is a ‘voluntary’ additional contribution to the EPF.
• Contribution limit: In VPF, employees can contribute up to 100% of their basic salary and DA, whereas in GPF also there are some rules, but it is mainly decided by government policies.

Both the schemes help in building a strong fund for retirement, but you should choose the right option based on your type of job and eligibility.