As per the rules of the Employees’ Provident Fund Organisation (EPFO), 12% of every employee’s basic salary and dearness allowance (DA) is deposited in the PF account every month. The company also contributes the same amount. Currently, this deposit is getting an interest of 8.25%, which is better than many government schemes. But, do you know that you can take even more advantage of this strong interest and accumulate a large fund for yourself by increasing your contribution to the EPFO? Here is the secret way to create a strong fund from EPFO.
Know what is that ‘secret’ way
As per the rules, if you want to increase your contribution to EPF directly, you cannot do so. But, you can increase your contribution to EPF through the Voluntary Provident Fund (VPF) and get the same 8.25% interest on your investment amount that you get on EPF. This is an incredible opportunity to multiply your savings manifold.
Contribute up to 100% of your basic salary
Like EPF, there is no salary deduction limit in VPF too. If the employee wishes, he can contribute up to 100% of his basic salary through VPF. That is, by increasing your investment through VPF, you can contribute as much PF as you want, from 12%. This is a boon for those who want to maximize their retirement savings.
You will also get ‘big’ tax relief
VPF has a lock-in period of 5 years. No tax is deducted on any withdrawal after the completion of the 5 years of full service. However, if you withdraw VPF before that, you will have to pay tax on it according to your tax slab. But, in the long run, this investment will give you great returns.
Investing in VPF saves you tax in three ways.
Its interest and withdrawal amount are tax-free. Therefore, it is now considered the Exempt-Exempt-Exempt (E-E-E) special category investment. In such a situation, tax is saved in three ways: deduction on investment under Section 80C of the Income Tax Act, no tax on interest, and no tax on maturity amount.
How to invest in VPF
If you are also interested in investing in VPF, then you have to meet the HR of your company and tell them that you want to increase your investment in PF. With the help of company HR, you can also open your VPF account along with the EPF. You have to fill out a form and give it to HR in which you have to give information about how much contribution of your salary you want to increase. After this, the process of starting your VPF account along with the EPF account will be completed. After the completion of this process, money will start getting deducted from your salary in VPF. This process is very simple.
Simple rules like EPF
The interest and benefits on VPF money are the same as EPF, similarly, the withdrawal rules are also the same as EPF. You can withdraw the entire amount of the VPF fund only after retirement. After 5 years, when its lock-in period is over, you can withdraw a partial amount from it. Claims for this can be made online. This facility provides you with financial assistance when you need it.