1 week Ago By Avijit Ghosal
VPF, or Voluntary Provident Fund, is a non-compulsory investment that an employee can opt for. It allows the investment to grow with the tailwind of the same rate of interest as enjoyed by the EPF (Employee's Provident Fund). Kolkata: Employee’s Provident Fund, or EPF, is one of the most potent social security schemes for employees in operation in India.
If you think EPF is an attractive and useful scheme, you have every reason to fall for the VPF, or Voluntary Provident Fund scheme. As indicated by the name itself, VPF is voluntary and not compulsory like EPF. But like the EPF, it has the same entity administering it — the Employees’ Provident Fund Organisation, or EPFO.
It is governed by the same rules and, most important, VPF enjoys the same degree of security as does EPF. Perhaps the most important point is that VPF enjoys the same rate of interest as EPF. Last year, the rate of interest applicable to EPF was 8.
25%. VPF too was subjected to the same rate. The attraction lies in the fact that there is hardly a long-term guaranteed-return rate of interest which is as high.
It was 8.25% in FY24. If one compares it with the rate of interest in Public Provident Fund (PPF), one finds the VPF rate was 1.
15 percentage point higher than that of PPF. Tax exemption Another point of attraction of VPF is that like PF and PPF, Voluntary Provident Fund, too, is categorised as an EEE investment. It means the entire contribution, principal and interest are exempt from income tax.
Thus, the employee who puts his/her in VPF can build a corpus with the highest safety and one of the highest rates of interest in the long run. However, if the contribution exceeds Rs 2.5 lakh a year, the interest accured is taxed.
Also if one withdraws VPF money before the expiry of five years, the withdrawals are taxed. Maximum contribution One of the most interesting aspects of VPF is that it has got no ceiling for investment. EPF contribution is at an uniform 12% of the basic salary + DA (dearness allowance) of an employee.
None can increase or decrease this contribution. However, VPF does not have any such limit. An employee merely needs to write to his/her company’s human resource department specifying the amount that should be deducted form the salary and put in a VPF account.
He/she is free to specify any amount that he/she wishes according to the financial needs. ANother point to remember is that there is no specific time when one can start a VPF account. It can be bgeun at any time of the year.
Click for more latest Personal Finance news . Also get top headlines and latest news from India and around the world at News9. Avijit Ghosal has been writing on topics of business, industry and investment for the past three decades.
He also writes on the broad economy, infrastructure and issues in banking. He has worked for economic dailies such as the Business Standard, The Economic Times, business magazines such as Business Today, English broadsheet the Hindustan Times and Bengali daily Anandabazar Patrika before joining TV9 Network..
