VPF: Voluntary Provident Fund is an extension of the EPF account. In this, any person can make additional contribution in his EPF account as per his wish.
Employee Provident Fund (EPF) is the only option out of all the deductions for investment and savings from salary, which gives a return of 8.5 percent. Just like that, Voluntary Provident Fund (VPF) also generates the same amount.
VPF only for those who already have an active EPF account.
What is VPF?
Voluntary Provident Fund is an extension of the EPF account. In this, any person can make additional contribution in his EPF account as per his wish, which is called VPF.
Generally, the amount deposited in EPF in excess of 12 per cent of the employee’s investment is considered as VPF. In this, a maximum of 100 percent of the basic salary and dearness allowance can be deposited. The interest on this amount is equal to the EPF.
However, investment in VPF is not mandatory on the part of the employer. At the same time, 12 percent contribution is made by the employer in EPF.
It is worth noting that once VPF is selected, then it cannot be closed for the next 5 years or else it will be taxed.
Benefits of VPF
Like EPF, VPF is completely tax-free. There is no tax on the investment amount, interest earned and money received in VPF. Like EPF, VPF is also a safe investment and is considered a risk-free long-term investment.
Interest of 8.5 percent is not available in any other investment option guaranteed by the government.
Investments made in this can also be claimed tax exemption of up to Rs 1.5 lakh per annum under section 80C of income tax.
open account like this
To open a VPF account, the employee has to apply for additional investment with the company. For this a registration form has to be filled. Your existing EPF account will also act as a VPF account.
money withdrawal rules
VPF also has the same lock-in period as EPF. If you want to withdraw money before 5 years then tax will be applicable.
The maturity amount is given to the employee when he retires or rejoins. On the death of the account holder, the money deposited in VPF is given to the nominee.
The money deposited in VPF is for retirement and this money can be withdrawn only in special situations like medical emergency, higher education, marriage of children and for construction or purchase of house.
How much will you earn?
According to experts, if you invest Rs 3,000 every month, then in 30 to 35 years this amount will grow to a very big one because the interest rate on it is high.
According to tax expert Arvind Agarwal, “Such returns are not available even in debt mutual funds, as the VPF is linked to your EPF account, the returns will always be higher. It is a safe investment option.
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