VPF - Voluntary Provident Fund
VPF is an extension of the Employees’ Provident Fund (EPF). Employee Provident Fund (EPF) acts as a saving tool for the employees. The employee and the employer contribute an equal amount towards savings that can be availed upon retirement or after switching jobs. However, an employee can choose to contribute an additional amount over and above the necessary amount as a Voluntary Provident Fund.
The employee availing VPF scheme can voluntarily contribute any percentage of his salary to the Provident fund account. Although, the contribution must be more than the PF ceiling of 12% that has been mandated by the government. The employer however is not obligated to contribute any amount towards VPF. An employee can contribute 100%
of his basic salary and DA.
Interest offered for VPF contribution?
VPF is considered a very attractive option to invest in. The current interest offered on VPF contributions is 8.5%, which is much higher than that of the Public Provident Fund (PPF). The Government of India, depending on various factors, periodically updates the interest rate offered of EPF.
VPF covered under Section 80C?
Under Section 80C of the Income Tax Act, 1961, employees are eligible for tax benefits of up to Rs.1.5 lakh. The interest that is generated from these contributions is also exempt from tax.
Benefits of VPF
The VPF account comes under the Exempt category. Therefore, employees can enjoy tax benefits and earn a large amount of money in the long-run by investing in the VPF. The main benefits of a VPF account are mentioned below:
Safe option to invest: Since the scheme is operated by the Indian Government, there are no risks involved in investing in the scheme. Compared to other long-term investment options offered by private organisations, it is very safe to invest in a VPF account.
High rate of interest: Under the VPF scheme, the rate of interest is 8.50% p.a.
Application process is easy: The process to open a VPF account is very simple. Employees can contact their employer’s finance team and request them to open a VPF account by submitting the registration form. The current EPF account will act as the VPF account as well.
Transfer process is simple: In case employees change their jobs, it is very simple for them to transfer the VPF account of the old company to the new one.