VPF Investment: Safe, Government-Backed, and More Profitable Than You Think

Every salaried person knows about EPFO, but today we are going to give you information about VPF. According to many experts, a VPF or Voluntary Provident Fund is more beneficial for any person. A good investment option gives you the highest return at the lowest risk.

If you are a salaried person and want to create a big fund to live a comfortable life after your retirement, then a Voluntary Provident Fund can be a great option for you.

What is VPF

VPF is an extension of the Employees Provident Fund. In this, the employee can contribute up to 100 percent of his basic salary + DA if he wants. However, like PF, there is no contribution from the employer in this. You also get the benefit of tax exemption on VPF investment.

How different is VPF from EPF

Only 12 percent of the basic salary can be contributed to EPF, but there is no limit on investment in VPF. You can keep your in-hand salary low and invest the rest in VPF. VPF is a government-backed scheme, so it is safe (risk-free). Its interest rate is fixed by the government every financial year. Currently, VPF gives 8 percent or more interest, which is more than a bank FD.

Who can open this account

Only employed people are eligible to open a VPF. No separate account is opened for VPF. For this, you have to contact your company’s HR or finance team. You have to request for contribution to VPF. As soon as the process is completed, VPF will be linked to your EPF account. However, under VPF, there is no restriction on the employer to contribute to EPF as much as the employee.

You can make a partial withdrawal only after 5 years of service. In a VPF account, you also get the facility of partial withdrawal in an emergency. To withdraw money from the account, the account holder must work for 5 years. If the transaction is done in a shorter period than this, then tax has to be paid. The entire amount of VPF can be withdrawn only on retirement.