PPF, EPF, GPF & VPF: All types of provident funds decoded

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Provident funds are one of the most preferred retirement instruments. The return is secure, safe and government guaranteed. In this age of low interest rate provident funds give relatively higher return. The interest rate of different types of provident funds range between 7.1% and 8.5%.

Broadly provident funds are classified into four different instruments, namely public provident fund (PPF), employee provident fund (EPF), general provident fund (GPF) and voluntary provident fund (VPF).

PPF

Any person can open a PPF account, which is currently offering 7.1% interest. The maximum amount that can be deposited in a PPF account is Rs 1.5 lakh in a fiscal year.

PPF is one of the few instruments which falls under ‘EEE’ category, i.e. everything is fully exempted from income tax. The initial lock-in period of an PPF account is 15 years and that can be extended at the discretion of the account holder.

EPF

A salaried individual is only eligible for this type of provident fund. Here the contribution of the individual is 12% of his/her basic salary. Besides the employer’s contribution is also 12%. It currently gives 8.5% yearly interest, highest among all savings instruments.

The account matures on an employee’s retirement. This amount is also fully tax free after maturity.

VPF

VPF is the voluntary fund contribution from the employee in his/her EPF account. It refers to any contribution beyond the stipulated 12% contribution by an employee towards his EPF. The maximum contribution is up to 100% of his basic salary and DA. Interest is earned at the same rate as the EPF, i.e. 8.5%.

Once the contribution is chosen in VPF, the same cannot be terminated or discontinued before the base tenure of five years is completed.

GPF

If any central or state government employee wishes to deposit in EPF more than the limit of 12% of his/her basic salary, the government gives him/her the provision of opening a general provident fund account.

Government employees beyond certain salary limits have to open a GPF account. The facilities and other rules are same as EPF.