PPF or VPF: where should your next Rs 10,000 go for better returns?

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If you’re saving steadily, choosing between options like the Public Provident Fund (PPF) and the Voluntary Provident Fund (VPF) might feel like splitting hairs. After all, both are safe, backed by the government, and offer tax benefits. But that “next Rs 10,000” you invest could grow quite differently over time depending on which scheme you pick.

VPF is for salaried employees only. It’s essentially beneath the umbrella of the Employees' Provident Fund (EPF)—you put in more than the usual 12 percent of basic + DA if you choose. The big advantage? You can contribute up to 100 percent of your basic salary + DA, and historically VPF interest rates (around 8.15-8.25 percent) have been higher than PPF’s. The downside: you need to be salaried, you’re locked in until retirement/exit rules apply, and you rely on your employer’s PF set-up.

PPF is open to everyone—salaried, self-employed or even minors (via guardian). You can invest up to Rs 1.5 lakh a year, the current interest rate is 7.1 percent for the October-December 2025 quarter, and it enjoys full tax benefits under Section 80C and tax-free interest. However, it comes with a minimum 15-year lock-in (though you can extend) and you don’t get the potentially higher rate that VPF offers.

If you’re eligible for VPF (i.e., you’re salaried and have an EPF account), the higher rate means that Rs 10,000 will accumulate faster in VPF than in PPF, all else equal. But—and this is key—“all else equal” is a big caveat.

Also if you’ve already maxed out other PF avenues or your employer doesn’t handle VPF smoothly, PPF may win on practical grounds.

Before you funnel Rs 10,000 into one or the other, ask yourself:

· Eligibility: Are you definitely eligible for VPF?

· Rate difference: How big is the rate gap between VPF and PPF today?

· Lock-in/exit conditions: Can you stay till retirement or 15 years comfortably?

· Contribution limit: PPF has Rs 1.5 lakh annual cap; VPF doesn’t cap (you can put more if your salary allows).

· Tax side-effects: Both qualify under 80C and offer tax-free maturity (for VPF subject to certain conditions).

· Flexibility: Do you need easy access or are you fine locking it away?

If you’re salaried, comfortable staying in the scheme long-term, and want maximum growth on that next Rs 10,000, VPF is the winner rate-wise. But if your job situation is uncertain, you value flexibility, or you’re self-employed, PPF makes more sense. The best bet is to pick the scheme that fits you, not just the highest rate.

And remember: Rs 10,000 invested today with compounding is powerful. Choose the vehicle wisely, and let time do the work.