If you invest in the Voluntary Provident Fund (VPF), you’ll be pleased to hear this news. The government is planning to make significant changes regarding this.
According to an article in the Economic Times, the investment limit for VPF under the Employees Provident Fund Organization (EPFO) might increase from ₹2.5 lakh, which currently has tax-free interest.
Right now, any interest earned over this amount is taxable. People involved in this matter say that the Ministry of Labor and Employment is looking into it.
Future Plans with the Finance Ministry
This issue is expected to be discussed with the Finance Ministry during the budget meetings for the financial year 2026.
The government aims to encourage middle-class individuals with lower salaries to save more in their EPF accounts.
The intention is to help them accumulate enough funds for their retirement. Previously, the government set a tax-free investment limit of ₹2.5 lakh in EPF, and any interest earned beyond this is taxable.
Tax Benefits from VPF Investment
The government introduced this rule to impose taxes on high-interest income, particularly for those with high salaries who deposit more money in the EPF to save on taxes.
The contributions made to VPF, the interest earned, and the amount withdrawn are all tax-free. Therefore, investing in VPF offers significant tax advantages.
Historical Interest Rates on PF Money
The EPFO has provided interest rates of over 8% for many years.
In the financial year 1990, the interest rate peaked at a record 12%, remaining at that level until the financial year 2000.
For the financial year 2022, the EPFO interest rate was 8.10%, followed by 8.15% in 2023, and 8.25% for the financial year 2024.
Total Deposits in EPF
According to current EPF rules, there is no limit on how much money you can deposit into your EPF account. However, the government has taken steps to prevent misuse of this rule.
Now, if you deposit more than ₹2.5 lakh in a year, you must pay tax on the interest earned. This regulation targets high-salary individuals who deposit large amounts to avoid taxes.
Millions of people contribute to the EPF, and a vast sum of over ₹20 lakh crore is deposited in total.
