VPF is extra money you choose to put into your own EPF account through payroll, and it earns the EPF rate. PPF is a separate 15-year government savings account that earns a rate the Finance Ministry notifies every quarter, and its tax rules and eligibility differ from VPF in ways that matter once your salary grows.
Diving Finance is not a SEBI-registered investment adviser. The author and site do not hold positions discussed here as advice. This article is for education only and is not investment, tax or legal advice. Confirm EPF/VPF rules with your employer or EPFO and tax treatment with a chartered accountant before you change contributions.
Key Highlights
- EPF, and therefore VPF, earns 8.25% for FY 2025-26, as per the EPFO order dated 1 July 2026.
- PPF earns 7.1% for 1 October to 31 December 2026; the Finance Ministry kept small savings rates unchanged on 30 September 2026.
- Interest on your own provident fund contributions above Rs 2.5 lakh a year (EPF plus VPF together) is taxable. The limit is Rs 5 lakh where the employer does not contribute.
- PPF deposits are capped at Rs 1.5 lakh a year, and PPF interest is generally tax-free.
- Both contributions can count toward the Rs 1.5 lakh old-regime deduction, now under section 123 and Schedule XV of the Income-tax Act, 2025.
- VPF needs an employer that runs EPF and allows VPF. Most resident individuals can open a PPF.
- Estimate PPF maturity with our PPF calculator.
Quick comparison table
| Feature | VPF | PPF |
|---|---|---|
| Who can use | Salaried EPF members whose employer allows VPF | Resident individuals (NRI and HUF limits apply) |
| Rate set by | EPFO with government approval, yearly | Finance Ministry, every quarter |
| Current rate | 8.25% (FY 2025-26) | 7.1% (Oct to Dec 2026) |
| Yearly limit | Above statutory EPF share, often up to basic plus DA | Rs 500 minimum, Rs 1.5 lakh maximum |
| Employer match | None on the VPF part | None |
| Lock-in | Follows EPF withdrawal rules | 15 years, extendable in 5-year blocks |
| Tax on interest | Taxable above the Rs 2.5 lakh contribution limit | Generally tax-free |
Interest rates right now
EPF and VPF: 8.25% for FY 2025-26
EPFO order No. INV-11/2/2021-INV/E-41960/2519 dated 1 July 2026 asks field offices to credit 8.25% for FY 2025-26 to every EPF member account. It cites the Ministry of Labour and Employment’s approval letter of 17 June 2026. VPF money sits in the same account, so it earns the same rate.
The rate for FY 2026-27 is declared only after the year, and it becomes final only when the government approves it and EPFO issues a credit order. Treat any number you see before that as a proposal. Our EPF interest rate page tracks the history.
PPF: 7.1% for October to December 2026
The Finance Ministry’s notification of 30 September 2026 kept small savings rates for 1 October to 31 December 2026 unchanged from the previous quarter, which leaves PPF at 7.1% a year, compounded annually. See our PPF interest rate page for past quarters.
A rate gap of about 1.15 percentage points looks large. Tax on interest, the deposit cap and how easily you can reach the money also matter, which the next sections cover.
Eligibility and contribution limits
VPF. You must be an EPF member, and your employer’s payroll must allow a voluntary contribution above the statutory employee share. Many employers allow up to 100% of basic pay plus dearness allowance, but confirm with HR. Your employer does not match the VPF portion.
PPF. Most resident individuals can open one account at a post office or an authorised bank. You can deposit from Rs 500 to Rs 1.5 lakh in a financial year. NRIs cannot open a new account, and the rules on existing accounts change if your residential status changes.
You can use both at the same time. Your cash flow and your tax picture set the limit, not a rule against holding both.
Tax: deduction, interest and the Rs 2.5 lakh rule
Deduction on what you put in
Under the old tax regime, your own EPF and VPF contributions and your PPF deposits can count toward the Rs 1.5 lakh deduction. In the Income-tax Act, 2025 this sits in section 123, read with Schedule XV, which replaces old section 80C. All the items in that bucket share one Rs 1.5 lakh ceiling. Our list of deductions under section 80C explains what else competes for it.
Tax on VPF interest
Since 1 April 2021, interest on employee contributions to a provident fund above Rs 2.5 lakh in a year is taxable. The limit is Rs 5 lakh if the employer does not contribute to that fund. The old Rule 9D splits the account into a taxable part and a non-taxable part to work out the taxable interest each year.
Only your own contributions count toward the limit: statutory EPF plus VPF. The employer’s share is left out of the test.
| Example | Yearly EPF plus VPF | Above Rs 2.5 lakh | Tax on interest |
|---|---|---|---|
| A | Rs 1.44 lakh EPF, Rs 1 lakh VPF, total Rs 2.44 lakh | Nil | Exempt |
| B | Rs 2.16 lakh EPF, Rs 1.2 lakh VPF, total Rs 3.36 lakh | Rs 86,000 | Interest on this part is taxable at your slab |
| C | Rs 2.16 lakh EPF, no VPF | Nil | Exempt |
In example B, once the excess has been in the account for a full year, interest on it at 8.25% is roughly Rs 7,000, and less in the first year because contributions arrive monthly. That amount builds up in the taxable part of the account and is taxed every year at your slab rate. The more VPF you add above the limit, the closer its post-tax return moves toward a taxable fixed deposit.
Tax on PPF interest
PPF interest and maturity are generally exempt. Because PPF deposits cannot exceed Rs 1.5 lakh a year, they stay below the Rs 2.5 lakh contribution test even if it applied to them. PPF deposits are not added to your EPF and VPF total for this test in standard guidance.
Liquidity: withdrawals, loans and job changes
VPF follows EPF rules. You can make partial withdrawals for listed purposes such as housing, medical needs, education or marriage, subject to service and balance conditions. When you change jobs, transfer the balance through your UAN instead of withdrawing it. A withdrawal before five years of continuous service can be taxable.
EPFO has revised its partial withdrawal framework in recent years. Check the current rules on the EPFO member portal before you plan around a specific percentage.
PPF is locked for 15 years. Partial withdrawals are allowed from the seventh financial year, and loans against the balance are allowed in the early years within scheme limits. After maturity you can extend in 5-year blocks, with or without fresh deposits.
How to use the PPF calculator
Our PPF calculator shows maturity value for a yearly deposit at the rate you enter. Use 7.1% as today’s rate, then try a lower and a higher rate to see how sensitive the result is.
VPF does not need a separate calculator. Your VPF credits and interest show in your EPFO passbook along with your regular EPF. For other goals, browse our calculators page.
Who usually uses which
These are frames, not recommendations.
People who often favour VPF are EPF members whose own EPF plus VPF stays under Rs 2.5 lakh a year, who like automatic payroll saving, and who are comfortable with EPF withdrawal rules.
People who often favour PPF want a separate account in their own name, are not salaried or have no VPF option, or have already crossed the Rs 2.5 lakh EPF limit. Some use both: VPF up to the limit and PPF for the rest of the deduction bucket.
If you also weigh NPS, our Hindi guide on NPS vs PPF covers that pairing. Hindi readers can also read EPF vs PPF and our PPF explainer.
Expert take: Ashutosh Joshi
“Start by adding up your own EPF contributions for the year, because the employer share does not count. If you are well below Rs 2.5 lakh, VPF lets you earn the EPF rate through payroll without extra effort. If you are already near that limit, the next rupee of VPF earns taxable interest, so compare its post-tax return with PPF, which stays tax-free up to Rs 1.5 lakh a year. Check your payslip, not a rule of thumb.”
Frequently asked questions
Is VPF better than PPF?
Neither is better for everyone. VPF suits EPF members who want the EPF rate through payroll and whose own contributions stay under Rs 2.5 lakh a year. PPF suits anyone eligible who wants a separate 15-year account with a Rs 1.5 lakh yearly cap and tax-free interest. Check the tax on VPF interest above the limit before you raise VPF.
What interest rates apply in late 2026?
EPF and VPF earn 8.25% for FY 2025-26, as per the EPFO order of 1 July 2026. PPF earns 7.1% for October to December 2026. The EPF rate for FY 2026-27 is final only after government approval and an EPFO credit order, so confirm it with EPFO before you assume a number.
Is VPF interest tax-free?
Only up to a limit. Interest on your own EPF plus VPF contributions above Rs 2.5 lakh in a year is taxable, or above Rs 5 lakh where the employer does not contribute. Interest on contributions within the limit stays exempt. Confirm how the rule applies to you with a chartered accountant.
Does the Rs 2.5 lakh limit include PPF?
Standard guidance says no. The limit applies to your contributions to the provident fund where your employer also contributes, which means EPF plus VPF. PPF deposits are capped at Rs 1.5 lakh a year anyway. Confirm your own case with a chartered accountant.
Can I contribute to both VPF and PPF?
Yes, if you are eligible for both. Under the old regime, both share the same Rs 1.5 lakh deduction ceiling with other eligible items, so extra money beyond it earns no further deduction. Plan around your cash needs and the lock-in of each.
Where can I estimate PPF maturity?
Use the Diving Finance PPF calculator at https://divingfinance.com/ppf-calculator/ with the current 7.1% rate. VPF does not need a separate calculator, because its balance and interest appear in your EPFO passbook along with your regular EPF.
Sources
- EPFO order No. INV-11/2/2021-INV/E-41960/2519 dated 1 July 2026 (text as reproduced at https://www.govtstaff.com/2026/07/employees-provident-fund-epf-accumulations-financial-year-2025-26-revised-interest-rates.html; EPFO site: https://www.epfindia.gov.in)
- Department of Economic Affairs, small savings notifications, Q3 FY 2026-27 listing dated 30 September 2026: https://dea.gov.in/budget-division/475
- Income Tax Department, Income-tax Act, 2025, Schedule XV (see section 123): https://www.incometaxindia.gov.in/w/schedule-xv-3
- CBDT notification inserting Rule 9D, 31 August 2021: https://cag.gov.in/uploads/subsite_whats_new/CBDT-circular-02092021-06131edc1b241c8-23021393.pdf
Diving Finance is not a SEBI-registered investment adviser. The author and site do not hold positions discussed here as advice. This article is for education only and is not investment, tax or legal advice. Confirm EPF/VPF rules with your employer or EPFO and tax treatment with a chartered accountant before you change contributions.
