Benefits of Voluntary Provident Fund (VPF)

The Voluntary Provident Fund (VPF) is a savings scheme offered by the Employees' Provident Fund Organization (EPFO) in India.

It allows employees to contribute a higher portion of their salary to their EPF account voluntarily.

Here are the key details of the Voluntary Provident Fund (VPF) scheme:

1. Eligibility:
Any salaried employee covered under the EPF scheme is eligible to contribute to the VPF.

2. Contribution:
While the standard contribution to the EPF is up to 12% of the basic salary (employee's share), the VPF allows employees to contribute more than the mandatory 12%.
The contribution to VPF is entirely voluntary, and employees can choose the percentage they want to contribute.

3. Tax Benefits:
Similar to EPF, contributions made to the VPF are eligible for tax deductions under Section 80C of the Income Tax Act.
The interest earned on the VPF is tax-free.

4. Interest Rate:
The interest rate on VPF is the same as that on the EPF and is declared by the EPFO. The interest is compounded annually.

5. Lock-In Period:
Like the EPF, the VPF has a lock-in period until retirement. Withdrawals can be made in specific situations such as retirement, resignation, or after two months of unemployment.

6. Withdrawals:
Withdrawals from the VPF can be made for purposes like buying a house, repayment of home loan, or during certain medical emergencies. However, certain conditions and limitations may apply.

7. Nomination Facility:
Employees can nominate their family members to receive the accumulated VPF corpus in case of the employee's demise.

8. Flexibility:
Employees can increase or decrease their VPF contribution rate once a year during the financial year.

9. Portability:
If an employee changes jobs, the VPF can be transferred to the new employer's EPF account.

10. Forms and Documentation:
Employees can contribute to the VPF by filling out the required form and submitting it to their Employer/HR.

11. Employer Contribution:
While the VPF is an employee-contributed scheme, employers do not have a mandatory obligation to match the contributions made by employees.

It's important for employees considering VPF to carefully evaluate their financial situation and long-term goals before deciding on the contribution percentage. Additionally, it's advisable to stay updated on any changes to the EPF/VPF scheme rules and regulations.

The employee, however, should ensure their annual contribution, along with monthly EPF and monthly VPF, is not above ₹2.5 lakh per annum. Beyond this limit, the return on the EPF contribution becomes taxable.

Note: Investing smartly in EPF + VPF not only helps in generating wealth, but also in achieving early retirement plan goals.

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