The Employees’ Provident Fund, or EPF, is one of the social security schemes that all employees of the Indian organised sector hold dear to his/her heart. For, it combines the highest interest rate in a guaranteed-return environment with the highest degree of safety of capital that one can think of. Add to that income tax benefits, and you have got a sheer winning recipe.
If you value EPF, there is no treason why you would turn your back to Voluntary Provident Fund, or VPF. It is a voluntary contribution from an employee to his/her EPF account which goes beyond the statutory requirement but offers the same benefits that are the USP of EPF. Also note that a VFP calculator online will help you to calculate the amount you can amass in a VPF account.
Is VPF a good investment?
The VPF is as good an investment as EPF. It carries an interest rate that is the same as EPF. The EPFO (Employee Provident Fund Organisation) announced the interest rate applicable to the accumulation in the EPF account. The same rate is applicable to the amount in VPF account too. For example, the EPFO declared the interest rate applicable to the EPF account for FY24 at 8.25%. It automatically becomes applicable to the outstanding amount in the VFP account too. Moreover, it carries the highest degree of safety of capital. Furthermore, VPF contributions are free from income tax too – it belongs to the EEE (exempt-exempt-exempt) category.
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Can I contribute more than Rs 1.5 lakh in VPF?
While Section 80C of the Income Tax Act caps EPF contributions to Rs 1.5 lakh each financial year, an employee can contribute up to Rs 2.5 lakh every year to the VPF account without running into additional tax burden.
However, a point to note is that if you begin contributing to a VPF account, you cannot terminate it before 5 years.
How to open a VPF account
Opening a VPF account is hassle-free. An employee needs to write to the HR or personnel department to open a VPF account. He/she should also indicate the amount that should be deducted from the salary and put into the VPF account. What is significant is that an employee can open a VPF account any day he/she wishes during a year.
