New Delhi: The Centre may be mulling a hike in tax-free interest rates on the voluntary provident fund (VPF). Currently, tax-free returns have been capped at Rs 2.5 lakh. The Centre is discussing proposals to raise the cap in a move that is likely to benefit middle-income individuals.
A Rs 2.5 lakh ceiling was imposed to check higher interest accrual by salaried individuals in the higher pay bracket. PF is known to offer competitive or even higher returns compared to FD rates.
Features of VPF
VPF is an exempt-exempt-exempt scheme which allows the corpus to remain tax-free at the time of investment, interest earned as well as maturity. PF rates have remained above 8 per cent since 1977-78. PF interest rates touched a record high of 12 per cent in FY90, the ET reported.
PF rates have moderated since then, with the EPFO’s governing council agreeing upon 8.25 per cent interest rates for FY24. Voluntary PF allows salaried individuals to invest up to 100 per cent of their basic salary as well as dearness allowance into their PF.
