FD vs. Debt funds vs. PPF vs. VPF for retirement and benefits
If you are given FD, Debt funds, PPF, or VPF for retirement, which one would you want to choose?
There are people who ask for safe investments while getting good returns.
A lot of people still do not consider having the VPF in their retirement.
What is VPF in salary? Voluntary Provident Fund (VPF):
There is nothing like VPF in a salary because 12% of the amount that is contributed by the employee and employer is known as EPF, and it is donated from the basic-salary and Dearness Allowance.
EPF is known as the Employee Provident Fund.
Any employee is also allowed to go above the limit of 12% and make contributions according to their needs.
The additional amount which an employee contributes is known as the VPF amount, and the voluntary amount is not mandatory, but it is the employee's own choice.
How much can I contribute towards VPF?
There is a limited amount that you can contribute towards the VPF.
You can easily contribute to a maximum of 100% in the VPF.
The salaried employees who are always contributing towards the EPF are the only ones allowed to contribute towards the VPF.
The interest rates for VPF is the same as for the EPF.
Fixed deposits (FD):
FDs are really one of the safest and secure sources, but the actual problem starts with the interest rates.
There are a lot of FD offerings that give an interest rate of around 7%, whereas the EPF returns are around 8.5%. If the difference between the 1.5% remains there, then it can be a very big problem for the debt portfolio.
The second problem that comes in with the FD is the taxable amount, which is added together and also how the FD rates keep on changing frequently and never remains the same.
Debt funds (DF)
The debt funds are not so secured as compared to the fixed deposits.
They also offer better returns, which are better than FDs.
There are multiple numbers of risks that take place in debt funds like interest rate risk, credit risk, and concentration risk.
The only best thing about debt fund is taxation.
Post Provident Funds (PPF):
PPF is known as the evergreen investment, as it is also applicable for the tax deduction under the income tax act.
The interest earned under this is tax-free, which is a great benefit, and also the interest rates are better than fixed deposits.
The only problem that the PPF faces is because of the liquidity.
The best part about the VPF is that the interest rates are higher than all the other deposits mentioned above.
The investment is also as secure and safe as the PPF and FD.
The only problem with VPF is liquidity.
There is a certain amount that is allowed for the withdrawal, and nothing above that which is a problem and also the tax is a problem here.