FD Vs PF, EPF, VPF

Savings and emergency funds are two crucial aspects of financial planning. Considering this, banks in India offer the best deposit plans in India, like Fixed Deposits (FDs), Employee Provident Fund (EPF), and Voluntary Provident Fund (VPFs). FDs are the most popular investment instrument that offers decent interest rates.

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Let us learn more about the FD Vs PF, EPF, and VPF in this article.

Comparison: FD Vs PF, EPF, VPF

FDs and Provident Funds provide opportunities for individuals to invest their hard-earned money in a safe and secure deposit. The investor gets the dual benefits of parking a small amount periodically to get a large corpus on maturity and earn interest during the tenure. 

This corpus helps the investor to live a tension-free life after retirement or when in need of immediate emergency funds.

Comparison Between
Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund
Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund
Guaranteed Return Plans
Returns Before Tax
7.5% (TAX-FREE)
Returns After Tax
7.5%
Guaranteed Returns
Yes
Life Cover
Yes
Tax on Profit
Tax Free*
Risk
No Risk
awards
Still Better than FD’s and Debt Mutual Fund
Fixed Deposits
Returns Before Tax
7% (TAXABLE)
Returns After Tax
4.8%
Guaranteed Returns
Yes
Life Cover
No
Tax on Profit
Taxable
Risk
Low Risk
Debt Mutual Fund
Returns Before Tax
8% (TAXABLE)
Returns After Tax
5.5%
Guaranteed Returns
No
Life Cover
No
Tax on Profit
Taxable
Risk
High Risk
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*For annual premium upto ₹5 Lacs

Let us understand the basic difference between FD vs PF, EPF, and VPF through the below-mentioned table:

Features FD PF EPF VPF
Eligibility Criteria
  • Resident individual citizens
  • NRIs
  • Senior citizens
  • Minors
  • Sole Proprietorships/ Group Companies/ Partnership Firms
  • Hindu Undivided Family
  • Societies/ Trusts
Resident Citizens of India
  • Salaried employees
  • Self-employed individuals
  • Unorganised workers
Mandatory for Salaried Individuals, if:
  • Salary of Rs. 15,000 or less
  • Employees from companies with more than 20 employees

Voluntary for Salaried Individuals, if:
  • Employees from companies with less than 20 employees
  • Salary of more than Rs. 15,000
  • Salaried employees resident of India
  • Voluntary contribution by employees
Documents Required
  • ID Proof
  • Address Proof
  • Photographs
  • KYC Verification
  • Duly filled Application Form
  • PPF Account is opened at a bank or Post Office
  • Documents required:
  • ID Proof
  • Address Proof
  • KYC documents
  • Passport-size photographs
  • Bank details
  • Digital signature of Company Director/ Partner/ Proprietor
  • Apply with the company HR/ Finance Department Incharge to create a VPF Account linked with your EPF Account
  • Link with Aadhar Card
Interest Rates 5% p.a.- 13% p.a. 7.1% p.a.
  • 8.1% p.a.
  • Debt-based Investment
8.1% p.a.
Tax Benefits Tax Deductions u/ Section 80C of the IT Act, 1961 Tax-free Returns and Interest No Tax is charged on Returns and Interest after 5 years of contributions Tax Deductions u/ Section 80C of the IT Act, 1961
Investment Amount Rs. 1000- No Limit
  • Rs. 500- Rs. 1.5 lakhs annually
  • In lump sum/ up to 12 periodic instalments per year
  • 12% of employee’s salary by employee
  • 12% of employee’s salary by employer
  • Up to 100%
  • Depends on employee
Investment Period 7 days- 10 years
  • Minimum 15 years
  • Extendable for an indefinite period with 5 years at a time
  • Until retirement
  • Transferable with a job switch
  • Until retirement
  • Can be extended post-retirement 
Premature Withdrawal Allowed
  • After 5 years of periodic deposits
  • Allows up to 50% of corpus withdrawal
  • After 7 years of regular deposits
  • Allows 50%-90% of corpus withdrawal
  • Allowed without any taxes after 5 years of contributions
Loan on Funds Available
  • Available for a period of up to 3 years
  • Allowed b/w 3rd- 6th year of regular contributions
  • Up to 25% can be availed
Available in emergency needs Available in emergency needs
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fd return beater

What is FD?

Fixed Deposits (FDs) are the most popular debt instruments that offer decent returns on lump sum investments for a specific tenure.

Features of FD

Some key features of FDs are:

  • Guaranteed returns, easily computable with FD Calculator

  • Fixed interest rates

  • Flexible investment tenure options

  • High interest rate on deposits of specific tenures

  • Easy to buy an FD plan with banks, NBFCs or Post Office FD 

  • Partial withdrawals are available

  • Loan against FD facility

  • Credit Card on FD option available

  • Tax benefits u/ Sec 80C of the Income Tax Act, 1961

What is PPF?

Public Provident Fund (PPF) is a retirement planning scheme where you can earn compounded interest on periodic investments.

Features of PPF

Let us have a quick look at the basic features of a PPF account in the list below:

  • Government-backed scheme

  • Only Single Life Account is allowed

  • Account opening is allowed at a minimum investment of Rs. 100 per month

  • No interest and tax benefits are available on investments of more than Rs. 1.5 lakhs

  • FD interest rates of 7.1% p.a. is decided by Central Government

  • Stable returns as it is not influenced by market fluctuations

  • Nominee facility available

  • No tax is levied on the maturity amount and interest earned

  • Compulsory to invest every year in PPF Account

  • Long-term investment with no risks

  • Account liquidation is allowed only after the completion of 15 years of the maturity period

FD interest rates India have fallen consistently over the last 12 years.
Invest in Plans that offer Guaranteed Returns for over 25 Years

What is EPF?

EPF or Employee Provident Fund is a contribution-based scheme to build retirement funds for salaried individuals. It is a Central Government scheme managed by Employee Provident Fund Organisation (EPFO). Contributing to the EPF fund is mandatory for all salaried employees earning less than Rs. 15,000 monthly. 

Features of EPF

Here are some of the features of the EPF scheme:

  • Employee contributes 12% of their salary towards EPF Funds

  • Employer also contributes equally 12% of the employee’s salary in the EPF Account of the employee

  • Companies having 20 or more employees must register with the EPF scheme

  • Provides social security and creates a financial net for the low-income individuals

  • Helps the salaried class build their retirement corpus

  • Accepts monthly contributions in a small amount

  • Tax deduction benefits u/ Sec. 80C of the Income Tax Act, 1961

  • Provide partial withdrawal during emergency needs

What is VPF?

The full form of VPF is Voluntary Provident Fund. The scheme takes voluntary contributions from salaried employees over and above their EPF contributions. Unlike EPF Account, the employer does not contribute funds to the employee’s VPF Account.

Features of VPF

The major features of contributing to a VPF Account are:

  • VPF interest rates are equally high to EPF rates at 8.1% p.a.

  • Safe deposits instruments as backed by the Government of India

  • Tax deduction benefits u/ Section 80C of the Income Tax Act, 1961

  • VPF contributions are made into the EPF Account of the employee

  • VPF declarations are extra contributions above your EPF contributions

  • Lock-in period is same as EPF Account

  • Fund withdrawal is allowed from the VPF Account if the employee is unemployed for 2 months or more and upon retirement

  • VPF Account can be opened by informing your employer

  • VPF funds are transferable with EPF Account transfer upon job switch

  • Must inform your new employer to contribute to VPF Account

Guaranteed return plan Guaranteed return plan

FD vs PF: Which One is Better?

Deciding among the best deposit schemes depends on factors like future financial commitments, current salary, interest rate, tax benefits, and investment horizon.

The major criteria to prefer investment among FD Vs PPF, EPF, and VPF is as follows:

  • High-salaried individuals choose to contribute to VPF and PPF Accounts as they offer high-interest returns with tax benefits

  • For short-term deposits, FD and VPF are good choices based on your investment horizon

  • If unsure of long-term tenure deposits as per present needs, FDs can help by offering a range of flexible tenure options

  • FDs provide extra investment coverage over and above EPF and VPF funds

  • VPF helps create a huge retirement corpus at a faster rate

  • Low-income individuals must join the EPF scheme

  • PPF is a good retirement planning instrument for non-salaried individuals

In Conclusion

To make the best investment, you must understand the difference between FD vs. PF, EPF, and VPF. All these schemes help create a safe and secure financial corpus for investors’ post-retirement life. However, it is important to diversify your investment in savings, deposits, and market-linked investments to build large funds for your short-term and long-term goals.

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FAQs

  • What is the difference between PF, VPF, and EPF?

    EPF and VPF are the contribution deposit plans for salaried individuals in India. An employee must contribute 12% of their salary to EPF Account and the employer contributes an equal amount to the employee’s EPF Account. 
    While the employee can voluntarily increase their contributions other than EPF with extra monthly contributions. 
    PF means Public Provident Fund (PPF) in which salaried employees, self-employed individuals, and unorganised workers can invest monthly to earn good returns on their PPF Amount over a tenure of 15 years.
  • Can I have both EPF and VPF?

    Yes, an employee can open their VPF Account along with EPF Account by informing their employer to deduct extra contributions from their salary. VPF contributions are deposited in the EPF Account, as the VPF Account is interlinked with the EPF Account. Both EPF and VPF funds earn the same interest at an 8.1% p.a. rate.
  • What are the disadvantages of VPF?

    The disadvantage of the Voluntary Provident Fund (VPF) is that you are not allowed to open a VPF account in the middle of the Financial Year (FY). VPF contributions cannot be stopped in a financial year if you choose it once. 
  • Which is better, FD or VPF?

    FD are good if you want flexible investment tenure options as per your short-term and long-term financial needs. VPF is a good long-term retirement deposit scheme that offers high-interest returns at 8.1% p.a. In addition, there are some banks that offer high fixed deposit rates that can be an option as well.
  • Does VPF contributions come under Section 80C of the IT Act?

    Yes, the contributions made in the VPF Account by employees are allowed for tax deductions under Section 80C of the Income Tax Act of 1961.

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+ Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
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