wordpress-seo domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home1/inves2ax/public_html/wp-includes/functions.php on line 6114Most salaried employees are familiar with the provident fund facility from their employers. Employee and employer contribute to the provident fund for the employee as a retirement benefit option. The fund is managed by Employee Provident Fund Office (EPFO) or various trustee boards under the purview of the finance ministry, Government of India. VPF or voluntary provident fund is the additional contribution by the employee over the PF contribution. We will discuss its benefits, interest rate, withdrawal rules, taxation etc. in this post.<\/p>\n
Voluntary Provident Find or VPF is the additional form of Employee Provident Fund or EPF. The salaried individuals who want to contribute to the EPF account in excess to the specified limit is called as VPF.<\/p>\n
Generally, an employee has to contribute 12% of the basic salary (Basic Pay + DA) towards the EPF. The same amount is contributed by the employer in the employee PF account. Now if the employee wants to save more on EPF he\/she can contribute more by opening a VPF account. The money goes to the same employee PF account. The employee can contribute a maximum of 88% of the basic salary towards VPF account (12% of basic salary is already contributed in the PF account).<\/p>\n
Remember in case of VPF your employer is not contributing anything towards the EPF account. The employer will continue to contribute only 12% which is applicable for EPF account and not for the VPF portion.<\/p>\n
You may be interested to know the employer contribution to Employee Pension Scheme (EPS) and free insurance<\/a> with all EPF account holders.<\/p>\n
The PF gives you fixed rate of interest set every financial year. VPF provides the same interest as provident fund earns. Moreover, the interest is tax free in the hand of investors. The government has fixed an interest of 8.55% for the FY 2017-18. The EPF interest rate was 8.65% for the FY 2016-17. The interest rates are fixed for a year by Government of India. It does not change quarterly unlike small savings schemes<\/a> such as PPF, SCSS, NSC etc.<\/p>\n
The tax treatment of VPF is same as EPF. It falls under EEE category of income tax which means the contribution towards VPF is tax-free, the interest earned and maturity is also tax-free. The contribution towards VPF up to Rs 1.5 Lakh can be claimed as tax-free under section 80C of income tax.<\/p>\n
You may be interested to know other top tax saving options<\/a>.<\/p>\n
However, if you withdraw the VPF amount before 5 years you have to pay income tax.<\/p>\n
The opening of a VPF account is very simple. You already have an EPF account with your employer. You need to intimate your employer to deduct the percentage of basic salary which can be deducted as VPF contribution.<\/p>\n
The accounts team or HR department of a company are handling this VPF contribution. Contact to the concerned department and fill up the pre-requisite form\/ declaration to deduct the specified amount from your salary. Most of the companies process the request once or twice a year. You should check and set the request in the starting of a financial year i.e. April month to start, stop or modify the contribution in VPF<\/p>\n
You can contribute up to 88% of your basic salary towards VPF contribution.<\/p>\n
PPF and VPF are two popular savings scheme among Indian citizens. PPF and VPF are different in the following aspects.<\/p>\n
Explore various Post office savings Schemes<\/a> and their latest interest rates.<\/p>\n
The VPF facility can be extended to the persons who fall under salaried class and have PF account. Those who are self-employed or working with unorganized sector without having PF facility cannot take the VPF advantage.<\/p>\n
The VPF interest rate is set by Government of India every year. The interest rate can be reduced in future. Though the interest rate is high historically compared to the PPF and other small savings scheme it can happen in future that VPF interest rate may be reduced significantly.<\/p>\n
You cannot change your contribution to VPF in the middle of a year. As said earlier, the companies process VPF contribution request once or twice in a year you cannot change your VPF contribution rate in between and you have to wait for the next date to change the rate.<\/p>\n
When you contribute to the VPF account it accumulates in the same EPF account which you have with your employer. The withdrawals rules of EPF are applicable to withdraw the VPF amount also.<\/p>\n
The VPF amount can be withdrawn fully and partially.<\/p>\n
When you take retirement of leave the job permanently you can withdraw EPF\/ VPF amount. The Universal Account number or UAN has made the job very easy. The processing of withdrawing the VPF amount is now easy and transparent. It does not even require your past employer’s signature\/ approval. Here is a handy guide how you can withdraw money from VPF account<\/a>.<\/p>\n
If you already have UAN account with your past employer but still not connected with the EPF accounts with present employer do link the PF accounts with same UAN. You can make it online through EPFO website<\/a>.<\/p>\n
Voluntary Provident Fund or VPF is a good option for retirement savings. The moderate interest rate and the disciplined investing of whole working life help you to achieve your retirement corpus<\/a>. The VPF can be considered as a long-term investment option for less risk takers and can be a great retirement fund for them. If you want to be simple in investment principals consider VPF as an investment option for retirement. If you want to earn more return and build wealth can think of equity investing with a long-term view.<\/p>\n
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