VPF vs. EPF vs. FD: Which Investment is Best for You?

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When it comes to planning for a secure financial future, especially for retirement, selecting the right investment options is crucial. For salaried individuals in India, two popular choices are the Employees’ Provident Fund (EPF) and the Voluntary Provident Fund (VPF). On the other hand, Fixed Deposits (FDs) have long been a go-to investment for their safety and guaranteed returns. However, many people are unsure about the differences between VPF and EPF and whether VPF is a better investment compared to FDs. This article will help clear up those questions and guide you in making an informed decision.

Additional Read: EPF or PF Withdrawal Rules

The Basics

To figure out which one of the three VPF, EPF or FD is the best option for your financial goals, it is important to get to know their basics. 

EPF or Employee Provident Fund:

The EPF is a mandatory savings scheme for salaried employees, managed by the Employees’ Provident Fund Organisation (EPFO). Each month, a fixed percentage (currently 12%) of an employee's salary is contributed to the EPF account by both the employee and the employer. This fund earns interest, compounded annually, and can be withdrawn at retirement or under specific circumstances.

VPF or Voluntary Provident Fund:

The VPF is an extension of the EPF, allowing employees to voluntarily contribute more than the mandatory 12% of their salary to their EPF account. The additional contributions also earn the same interest rate as the EPF and benefit from tax exemptions under Section 80C of the Income Tax Act. However, VPF contributions are entirely made by the employee, without any additional contribution from the employer.

FDs or Fixed Deposits:

Fixed Deposits or FDs are accounts offered by banks in which people can deposit money for a particular period. Only when the term gets completed do these deposits become payable. All residents, including minors, can open FDs if they meet the eligibility criteria of the bank they wish to apply to. 

The Differences:

Now that you know the basics about what these three investment savings plans are about, here’s a look at how they are different from one another.






Anyone can invest

Only salaried employees can invest

Only salaried individuals can invest


7 days to 10 years

Till retirement or resignation

Till retirement or resignation

Interest Rates PA 

8.5% - 9% bank FDs

12%-13% company FDs



Tax Benefits

Available under Section 80C

Available under Section 80C

Available under Section 80C

Investment amount


12% Basic + DA by both employee & employers


Premature Withdrawals






Available for certain needs

Available for certain needs

Which is a Better Investment?

So now that we have gone through the basics and the differences between VPF, EPF and FD, trying to figure out which one to invest in might just get easier. However, just in case you are still confused, we got you covered. 

Here are a couple of things you need to keep in mind before you invest:

  • Always invest keeping in mind your future goals and your current income
  • In this regard, both FDs as well as PFs help an investor save up better for the future.
  • For salaried individuals, apart from investing in EPFs or VPFs, FDs can also be an option
  • For non-salaried individuals, however, FD is the best option available since they cannot invest in PFs.
  • FDs are more convenient and flexible when it comes to the customizable investment amount and they also offer higher rates of interest.
  • Keeping both short-term and long-term needs in mind, FDs make for an attractive option to invest in.


While FDs provide guaranteed returns and higher liquidity, the tax efficiency and potential growth of VPF make it an attractive choice for long-term savings, particularly for retirement planning.

It is crucial to know how and with which plan to grow your savings as only then can one have a stress-free retirement. So choose wisely the next time you decide to invest your hard-earned money in a scheme.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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