Tax on PF interest: Which debt mutual funds can be an alternative to VPF contribution? SECTIONS Tax on PF interest: Which debt mutual funds can be an alternative to VPF contribution?By Joydeep Sen, ET CONTRIBUTORS Last Updated: Mar 03, 2021, 10:00 AM IST Share Synopsis The SLR of investment stands for safety, liquidity and returns. EPF / VPF is safe. Debt MFs can also offer reasonable safety provided you select the fund with the right portfolio quality and do the right matching of portfolio maturity and investment horizon. Getty Images The Union Budget presented on 1 February 2021 has imposed tax on interest earned on Employee Provident Fund (EPF) contributions beyond Rs 2.5 lakh per financial year. . The government has a logic for imposing this tax, as data revealed that a few HNIs were contributing a big chunk and availing of tax efficiency. However, it changes the equation for many salaried people. It includes people with salary on the higher side as well as those who contribute voluntarily through VPF. In a Voluntary Provident Fund (VPF), employees contribute voluntarily, though there is no tax benefit under section 80C of the Income tax Act (unlike contributions to EPF which qualify for tax break under Section 80C). Reason is, VPF earns the same attractive rate of interest as EPF and the interest has been tax exempt till now.