If you are a salaried employee covered by the Employees’ Provident Fund Organization (EPFO), you can significantly increase your retirement savings through the Voluntary Provident Fund (VPF).
VPF allows you to contribute additional funds to your existing EPF account, helping you build a larger corpus for the future.
The best part is that your money is safe and earns regular monthly interest.
What is Voluntary Provident Fund (VPF)?
VPF is an extension of your regular EPF account.
It allows employees to make voluntary contributions beyond the standard EPF deduction.
Key points about VPF:
Employees can contribute up to 100% of their basic salary if they wish.
The interest rate is the same as EPF, currently 8.25%, which is higher than many bank fixed deposits (FDs).
Contributions continue for at least five years to enjoy full benefits.
This gives you an excellent opportunity to accumulate a substantial retirement corpus over time.
VPF Tax Benefits
VPF contributions are tax-friendly under the Income Tax Act:
Investments are eligible for a deduction of up to ₹1.5 lakh under Section 80C.
If your combined EPF and VPF contributions are less than ₹2.5 lakh per year, the interest is tax-free. For government employees, this limit is up to ₹5 lakh.
Withdrawals from VPF after five years of continuous service are tax-free.
How to Start Investing in VPF
Inform your company’s HR or Payroll department that you want to increase your VPF contribution.
Fill out a form specifying the portion of salary you wish to contribute.
HR will update your contribution, and the VPF will start being deducted from your salary.
Even if you are a freelancer or change jobs, you can continue adding to your VPF account through HR or the EPFO portal.
You can track your contributions and total balance every year through your EPF passbook, UMANG app, or DigiLocker.
