VPF ( Voluntary Provident Fund )

Updated on: Feb 10th, 2023 - 7:59:19 AM

5 min read

social iconssocial iconssocial iconssocial icons

The VPF or Voluntary Provident Fund is a non-compulsory investment made by salaried employees over and above the EPF i.e. Employees Provident Fund. Major advantages being that it is a government backed savings scheme with low risks and high returns. Learn more about VPF in this article. 

 

Latest Updates:

The interest rate applicable to the EPF contributions is 8.1% for FY 2022-23.

What is Voluntary Provident Fund?

Voluntary Provident Fund (VPF) aka Voluntary Retirement Fund is the voluntary fund contribution from the employee towards his provident fund account. This contribution is beyond the 12% of contribution by an employee towards his EPF. The maximum contribution is up to 100% of his Basic Salary and Dearness Allowance. Interest is earned at the same rate as the EPF.

Employers are under no obligation to contribute to their employees’ VPF portfolio. Likewise, an employee is also under no obligation to contribute to the Plan. Once the contribution is chosen in VPF, the same cannot be terminated or discontinued before the base tenure of 5 years completed. The interest rate of Voluntary Retirement Plan is decided by the Government of India at the start of each financial year.

Who can invest in Voluntary Provident Fund?

A VPF is an extension of the EPF. The VPF option is available only to salaried individuals who receive their monthly payments through a specific salary account.

Benefits of Voluntary Provident Fund

The VPF falls under the EEE category ( EEE – exempt on contribution; exempt from the principal; exempt on interest) making it an excellent tax saving option. It also helps the employee amass a sizeable savings portfolio and help him during big life milestones.

Other benefits are

  • Safe Investment Option 
    The scheme is managed by the Govt of India with fixed interest accrual. Hence, it is considered as a risk-free investment compared to the long-term investment ones offered by other private players.
  • Easy to Apply 
    To open a VPF account, an employee has to approach his HR/Finance team and advise them to raise a request for an additional contribution in the VPF through a registration form. The existing EPF account will serve as the additional VPF account.
  • High returns
    Currently, the interest is accrued at 8.5% per annum under this scheme. Contributions up to 1.5 lakhs PA and interest accrued is exempt from tax under Section 80C, resulting in higher returns in a long-term perspective.
  • Easy transfer
    The account can be transferred from one employer to another upon changing jobs.

Withdrawal facilities

The fund allows partial withdrawals as loans with also the possibility of complete withdrawals. If the withdrawal happens before the 5-year minimum tenure, then tax will be applicable on the accumulated maturity amount. Once the employee resigns or retires from the employment the final maturity amount is paid to him. At the time of the untimely death of the account holder, the nominee can get the possession of the accumulated fund in the VPF account.

The VPF fund is mainly popular as the accumulated money can be withdrawn at any given time. In case of an unforeseen financial emergency, one can always fall back to his VPF account. The account can be broken for many reasons which include :

  • Payments of medical bills for the individual and his kin
  • Cost-intensive events like higher education and marriage 
     
  • Payments for house construction or purchase of new land/house

Frequently Asked Questions

 

How are VPF and EPF different from each other?
 

VPF is the extension of EPF. In an EPF account, a person has to mandatorily give 12% of his Basic Salary and Dearness Allowance towards the fund. In a VPF, it is a voluntary contribution with the maximum limit at 100%.

Who is eligible to open a VPF account?
 

All employees who are on a company’s payroll are eligible to open a VPF account.
 

Will my VPF account get affected if I change jobs?
 

The VPF account is linked to your Aadhar Card. So, it is very easy to transfer your account from one employer to another.
 

inline CTA
File your returns in just 3 minutes
100% pre-fill. No manual data entry
CONTENTS
;

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption