EPF VPF Retirement Corpus: If you are a salaried employee covered by the Employees Provident Fund Organization (EPFO), you have a significant gift in store for you. Through EPF, you can easily increase your retirement corpus with a Voluntary Provident Fund (VPF). The Voluntary Provident Fund is a way to add additional funds to your existing EPF account.
This facility, provided by the EPFO, allows you to invest a larger portion of your salary in EPF, ensuring a larger corpus at retirement. This provides substantial monthly interest, while eliminating the risk of losing your funds. VPF is essentially an extension of EPF, allowing employees to make voluntary contributions. This means that you can add more money to your EPF account as per your capacity. There is no salary deduction limit for VPF. Employees can contribute up to 100% of their basic salary if they wish. The interest rate on VPF is the same as that on EPF, meaning the same interest rate applies to VPF as on EPF. This gives you the opportunity to accumulate a larger corpus than PF.
Tax exemption in VPF?
Once you start contributing to VPF, it is necessary to continue it for at least 5 years. The interest rate of EPF is fixed at 8.25% and the same rate is applicable on Voluntary Provident Fund as well. This interest rate is higher than the fixed deposits (FD) of many banks. The amount deposited in Voluntary Provident Fund is eligible for exemption up to Rs 1.5 lakh under Section 80C of the Income Tax Act. If your EPF and VPF contribution in a year is less than Rs 2.5 lakh, then the interest will be tax-free. For government employees, this limit is up to Rs 5 lakh. Withdrawal after 5 years of continuous service is also tax-free.
How to start investing in VPF?
Inform your company’s HR/Payroll that you want to increase your VPF contribution. You’ll need to fill out a form detailing how much of your salary you want to contribute and submit it to HR. They will then complete the process, and your VPF will be deducted from your account after some time. Even if you’re a freelancer or change jobs, the process for adding VPF to your EPF account is available through HR or on the EPFO ​​portal. Check your contributions and total balance every year in your EPF passbook/UMANG/DigiLocker.
