If you are a salaried EPF member, VPF currently pays more than PPF: 8.25% for FY 2025-26, against 7.1% for October–December 2026. It also has no ₹1.5 lakh cap, and it is deducted from your salary automatically. PPF is open to anyone, pays fully tax-free interest without limit, and lets you choose when to deposit. Once your own PF contributions cross ₹2.5 lakh a year, the extra VPF interest is taxed, and for many people PPF then gives the better post-tax return. This guide compares both on every point that matters, and shows where NPS fits.
VPF vs PPF at a glance
| Feature | VPF (Voluntary Provident Fund) | PPF (Public Provident Fund) |
|---|---|---|
| Who can invest | Salaried employees who are EPF members | Any resident individual, salaried or not |
| Interest rate | 8.25% for FY 2025-26 (same as EPF) | 7.1% for October–December 2026 |
| How the rate is set | Once a year: recommended by EPFO's Central Board of Trustees, ratified by the Finance Ministry | Every quarter, by the Finance Ministry |
| How much you can put in | Any amount above your compulsory 12%; payroll systems commonly allow up to 100% of your PF wage | ₹500 to ₹1.5 lakh a financial year |
| How you pay | Deducted from salary every month | You deposit it yourself, any time in the year |
| Employer contribution | None on VPF; the employer matches only the compulsory 12% | None |
| Tax deduction on deposit | Old regime only, within the ₹1.5 lakh limit of Section 123 (formerly 80C) | Old regime only, within the same ₹1.5 lakh limit |
| Tax on interest | Tax-free on your own EPF + VPF contributions up to ₹2.5 lakh a year; taxable above that | Fully tax-free |
| Tax on withdrawal | Tax-free after 5 years of continuous service | Tax-free |
| Lock-in | Follows EPF withdrawal rules | 15-year account, extendable in 5-year blocks |
| When you change jobs | Moves with your EPF through your UAN; you must opt in again with the new employer | Not affected; the account is yours |
Which gives more money?
Compare the same amount, ₹1.2 lakh a year for 15 years (₹18 lakh in total), at today's rates held constant:
| VPF: ₹10,000 a month at 8.25% | PPF: ₹1.2 lakh deposited by 5 April each year at 7.1% | |
|---|---|---|
| Total deposited | ₹18,00,000 | ₹18,00,000 |
| Value after 15 years | ₹34,47,978 | ₹32,54,567 |
VPF ends about ₹1.9 lakh ahead, even though PPF gets the advantage of a lump-sum deposit at the start of each year.
How the figures are worked out:
- VPF: interest is calculated the EPFO way, on the monthly running balance and credited once a year.
- PPF: interest is compounded once a year. Depositing by the 5th matters, because PPF interest for a month is paid on the lowest balance between the 5th and the end of that month.
Both rates change over time, so treat this as a comparison at current rates, not a forecast. To run your own numbers, use the VPF calculator and the PPF calculator.
Where VPF loses its edge: the ₹2.5 lakh limit
VPF interest is tax-free only on your own contributions (12% EPF plus VPF) of up to ₹2.5 lakh a year. Interest on anything above that is taxed every year at your slab rate. PPF interest is never taxed.
On contributions above the limit, at 8.25%:
- 30% slab (with 4% cess): about 5.7% after tax.
- 20% slab (with cess): about 6.5% after tax.
- PPF: 7.1%, tax-free.
So once you are above the limit, PPF wins on post-tax return in both slabs. You reach the limit sooner than you might expect. At 12% EPF plus 10% VPF on your full PF wage, it happens above a monthly PF wage of about ₹94,700. The VPF tax guide shows the crossing point for each VPF rate, and how EPFO taxes the excess.
On the deposit side, the two are equal. Both count towards the same ₹1.5 lakh deduction under Section 123 (formerly 80C) in the old regime, and neither gets any deduction in the new regime, which is the default.
Access to your money
VPF follows EPF rules under the EPF Scheme, 2026:
- partial withdrawals are allowed after 12 months of membership, for essential needs, housing or special circumstances;
- 25% of your contributions must stay in the account as a minimum balance;
- the full balance is paid on retirement, or after a long period without covered employment.
You cannot withdraw only the VPF part.
PPF runs for 15 years:
- you can take a loan against it from the third to the sixth year;
- you can make one partial withdrawal a year from the seventh year;
- premature closure is allowed only after five years, for specified reasons such as serious illness or higher education, and at a lower interest rate.
The practical difference is that PPF's rules are fixed by the account's age. VPF's rules depend on your EPF membership and employment.
Where NPS fits
The National Pension System (NPS) is the third option salaried people often compare. It works differently from both VPF and PPF.
- Returns are market-linked, not fixed. Your money is invested in a mix of equity, corporate bonds and government securities that you choose, so there is no declared rate.
- It keeps a tax break in the new regime. Your employer's NPS contribution is deductible up to 14% of Basic + DA under the new regime (10% for private-sector employees under the old regime). From tax year 2026-27 this is Section 124 of the Income-tax Act, 2025 (formerly Section 80CCD). Neither VPF nor PPF offers any deduction in the new regime.
- There is an extra ₹50,000 deduction for your own NPS contribution, over the ₹1.5 lakh limit, but only in the old regime.
- Exit rules changed in December 2025. Non-government subscribers can now take up to 80% of the corpus as a lump sum at normal exit, with at least 20% going into an annuity, where the corpus is above ₹12 lakh. Government subscribers stay on 60:40. Annuity income is taxable, and published guidance differs on how much of the lump sum above 60% is tax-free, so check the current rules before you exit.
In short: VPF and PPF are for guaranteed, government-administered returns. NPS is for long-term growth with market risk. Many salaried people use VPF or PPF for the safe part of their savings and NPS, especially an employer contribution, for growth.
Which should you choose?
| Your situation | Better fit | Why |
|---|---|---|
| Salaried EPF member, own contributions well below ₹2.5 lakh a year | VPF first | Higher rate, tax-free interest, automatic saving |
| Own contributions already near or above ₹2.5 lakh | PPF for the extra money | VPF interest above the limit is taxed; PPF stays tax-free at 7.1% |
| Self-employed, freelancer, or not covered by EPF | PPF | VPF is not available to you |
| Want an account that is yours regardless of job changes | PPF | No employer involvement; deposit when it suits you |
| On the new tax regime and want a tax break | Employer NPS contribution | Neither VPF nor PPF gets a deduction in the new regime |
| Long horizon, comfortable with market risk | NPS alongside VPF or PPF | Equity exposure for growth; fixed-return product for stability |
Many salaried people use both:
- VPF up to the ₹2.5 lakh limit;
- PPF for tax-free savings beyond it, and for the flexibility of an account that is fully under their control.
Common mistakes in VPF vs PPF comparisons
- "Your employer can contribute to your VPF." Employers match only the compulsory 12%. VPF is your money alone.
- "VPF is deducted before tax." It is deducted from salary, but your salary is taxed in full. Any deduction comes later, under Section 123, and only in the old regime.
- "VPF interest is always tax-free." Only on your own contributions of up to ₹2.5 lakh a year.
- "VPF earns more than EPF." It earns exactly the EPF rate, because it is the same account.
- "PPF has no lock-in for five years." It is a 15-year account. Partial withdrawals start only from the seventh year.
About This Guide
Sources and Rates
- PIB, Ministry of Labour & Employment: CBT recommends 8.25% interest for FY 2025-26 (2 March 2026)
- Employees' Provident Fund Organisation (official website)
Rates and rules are as of 20 October 2026. Projections use current rates held constant and are not forecasts. This is general information, not investment or tax advice.
Frequently Asked Questions
Can I invest in both VPF and PPF?
Yes. They are separate schemes. Under the old regime, deposits in both count towards the same ₹1.5 lakh deduction limit under Section 123.
Which is safer, VPF or PPF?
Both are government-administered and not exposed to market prices. PPF is a small savings scheme run by the Central Government. VPF sits in your EPF account, which EPFO manages under the Code on Social Security, 2020. Neither rate is guaranteed for future years.
Is VPF better than PPF for someone in the 30% slab?
Up to the ₹2.5 lakh contribution limit, yes, because 8.25% tax-free beats 7.1% tax-free. Above that limit, VPF interest is taxed and works out to about 5.7% after tax, so PPF's 7.1% is better.
Can self-employed people open VPF?
No. VPF is available only through an employer's EPF payroll. Self-employed people can use PPF and NPS.
What happens to VPF when I change jobs?
Your balance moves with your EPF when you transfer it through your UAN. VPF does not continue automatically, so you need to opt in again with your new employer.
How often do VPF and PPF rates change?
The VPF rate is the EPF rate, set once a year. The PPF rate is reviewed every quarter.