VPF: If you have a job, you must be making contributions to EPFO every month. Each month, 12% of the employee’s basic salary and dearness allowance (DA) is withheld and deposited into the PF account. The company contributes an equal amount as well. At present, an interest rate of 8.25% is provided on EPF. This rate is superior to the interest gained from all government programs.
In this scenario, a significant sum of money can be saved by investing in EPF over an extended period. However, if you wish to regain the high returns on EPF, there’s one thing you must do. Learn about it here.
You can boost your EPF contribution via the Voluntary Provident Fund (VPF)
As per the regulations, you cannot directly raise your contribution to EPF. However, you can boost your EPF contribution via the Voluntary Provident Fund (VPF) and enjoy the same interest rate (8.25%) on your investment that you receive from EPF. Any EPFO member has the option to raise his contribution to the Provident Fund via VPF. There is no cap on salary deductions in VPF. If the employee desires, he is allowed to contribute as much as 100 percent of his base salary. If you’re keen on investing in VPF as well, you need to speak with your company’s HR and inform them of your intention to boost your PF investment. With HR’s assistance, you can establish your VPF account simultaneously with your EPF.
You need to complete a form and submit it to HR indicating how much you wish to raise your salary contribution. Following this, the procedure for your VPF account and EPF account will be finalized. Upon completion of this process, you can begin deducting funds from your salary into VPF.
Advantages of having a VPF account
After the VPF investment begins, the funds will be automatically taken from your salary each month, similar to the EPF. Once you choose VPF, you must contribute funds to it for a minimum of 5 years. The interest and advantages on VPF amounts are identical to those of EPF, and the withdrawal rules for the amounts are also the same as those for EPF. The complete sum of the VPF fund can be withdrawn solely upon retirement. Once the 5-year lock-in period concludes, you may withdraw a portion of it.
To achieve this, a request can be submitted online. If you switch jobs, the PF account can similarly be transferred just like the EPF. When you invest in VPF, both the interest earned and the withdrawal amount are tax-free. Consequently, it is classified as an Exempt-Exempt-Exempt (EEE) category investment. It receives the advantage of tax exemption according to section 80C of the Income Tax Act. In this fund, you can seek tax exemption of up to Rs 1.50 lakh within a financial year.