Fixed deposits have been a favorite investment option among Indians for a long time now. People here prefer to invest in such investment options, where one can get guaranteed returns and the amount invested is safe. FD is one such investment option. But the interest rates on FDs have come down significantly in the last few years. Because of this people are now looking for other investment options.
Government backed small savings schemes also provide guaranteed returns. Talking about salaried employees, PPF and VPF are very good investment options for them. Today we will tell you about these two in detail.
Public Provident Fund (PPF)
Public Provident Fund was introduced as a savings instrument in 1968 by the National Savings Institute of the Ministry of Finance. This plan comes with income tax benefits. In PPF, you have to invest a minimum of Rs 500 in a financial year to keep the account active. At the same time, you can invest a maximum of Rs 1.5 lakh in PPF in a financial year. PPF comes with a lock-in period of 15 years. At present the interest rate in this scheme is 7.1 percent per annum. PPF offers income tax exemption of up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act 1961. The interest earned in this scheme is also completely tax free.
Voluntary Provident Fund (VPF)
VPF is a voluntary contribution, which is in addition to the statutory EPF contribution. Only salaried employees, who are members of EPFO, can invest in VPF. Employees cannot contribute more than 12% of their basic salary to EPF. If employees want to contribute more than 12 percent of their basic salary, then they can do it under VPF. The current interest rate on VPF is 8.50 percent. Contribution to VPF is eligible for tax exemption under section 80C. Like EPF, VPF also comes with EEE status. That is, the investment amount, interest amount and maturity amount are all tax free.
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