Benefits of investing in VPF or Voluntary Provident Fund
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Benefits of Investing in VPF

The road of employment leads an employee to the ultimate goal of saving for retirement. Voluntary Provident Fund is one such retirement investment option which qualifies to be one of the efficient tax-saving retirement benefit plans.

As the name suggests, it is a voluntary contribution made on the part of the employee towards his/her EPF account. The benefits arising from such scheme are similar to that of the other PF schemes.

VPF or Voluntary Provident Fund is one of the best retirement tax-saving investment scheme similar to Employees Provident Fund (EPF) where a salaried employee can voluntarily contribute more than the upper ceiling of 12% towards his/her PF Account which can go up to a maximum of 100% of the salary (Basic + DA). However, it should be noted that the investment in such scheme is not mandatory and an employee can opt to invest as per his own discretion and amount.

Benefits of Investing in VPF

Let’s understand why investing in VPF is such a good tax saving investment option.

Risk-free investment

The Provident Fund Schemes are considered to be a debt oriented investment option and hence, it bears a fixed rate of interest, i.e. the returns are guaranteed.

Also, the funds are managed by the Government of India which scales down the risk of default in repayment to zero.

No mandatory contribution

The saving towards the VPF is not mandatory and the employee can determine his/her contribution towards such scheme. On the other hand, the contribution can also go up to a maximum of 100% of the employee’s salary (Basic + DA).

Tax benefits

  1. The contribution is deductible up to a maximum of ₹ 1.5 Lakhs per annum under section 80C.
  2. The interest received is exempted up to 9.50% under the Income Tax Act, 1961.
  3. The proceeds of VPF upon maturity is tax-free.

Competitive rate of interest

The rate of interest is high as compared to the other debt oriented investment options.

Easy process

It has always been easy to register for VPF just by intimating your employer in a basic KYC form with the amount of deduction for VPF from salary and your EPF account can then serve as your new VPF account.

Long-term investment

Contributing to VPF is a long-term investment scheme which qualifies it to be a good retirement saving plan and a potential pension fund.


The investment in VPF doesn’t get affected with the change in the employer as every employee is assigned a UAN (Unique Account Number) liked with the EPF Account by the government.

Loan option

The VPF scheme comes with an option to avail loan for various purposes such as child’s education, child’s marriage, home loan repayment, etc.

Investment planning should always be done at the beginning of the FY to effectively achieve your savings goals. If you need any assistance in planning your taxes and e-filing your tax returns, the tax experts at H&R Block will be happy to help you.


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Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.


  1. Jijo says:

    Hello Sir,

    Thanks for the detailed information.
    One quick question – Is it wise to opt for VPF for someone falling in 30% tax slab as your tax liability gets reduced as the amount going to VPF directly and returns are tax free ?

    • H&R Block India says:

      The tax savings from your contribution to VPF will only reduce your tax liability to the extent of Rs 1.5.lakhs. However, you can still look at this investment if you have not yet exhausted the 80C limit of deductions. In order to look for more deductions from your taxable income you can invest in NPS and get up to Rs 50,000 as tax deduction.
      In order to reduce your tax liability you may contact us on to get in touch with our tax experts.

      • Jijo says:

        Thank you for the update sir,
        My 80C is fully exhausted and i am under the impression that contributing to VPF ( say 30% of your base salary) can reduce my Total Gross salary and that amount is exempted from Tax.
        In other words, if my taxable income is 12Lakhs/year, contributing more to VPF will reduce the taxable income ?

      • Jijo says:


        Contributing to VPF can reduce your taxable income even though your 80C is exhausted ?

  2. Tiju says:


    I just started my first job and got introduced to all these things. I am pretty much lost as to how to invest. I was not even aware of these things until yesterday. Also, as the company i work in employees a little over 20 people, EPF is not there. So, will I still be able to invest in VPF?

    The only thing I understood clearly till now is the HRA part in my Declaration. Could you me guide me on how should I invest my money to maximize the tax savings?

    • H&R Block India says:

      Hi Parul,

      VPF is just a voluntary additional contribution to the Employees PF and can be contributed only when there is an EPF in place in the company. Apart from this, you can still save money if you produce proper proofs for rent to claim HRA benefit, travel tickets to take advantage of your LTA benefit etc. We can educate you on many such benefits if you get in touch with our experts at

  3. MANI says:


    Good Evening…

    Thanks for your valuable info sharing, I am a pvt employee having epf a/c contributing Rs.3600 (1800+1800) per month. Should I go for invest in VPF or in LIC Retirement schemes for better pension after retirement. Pl suggest. Thanks in Adv….

  4. Sultan says:

    Hello, I just want to confirm that if i start contributing in VPF 5000 pm which goes to 120000 in 2 years and after 2 years i am in need for money for any emergency so can i withdraw my VPF contribution completely 120000 or there will be limit to withdraw my money.

  5. Saurabh says:

    You should be able to withdrawal in emergency situations. These days Adhar based Online withdrawal from unified epfo website has made it very easy process.

    One point to consider, If the EPFO subscriber has contributed towards his or her employee provident fund or EPF for a period more than five years, the amount received upon withdrawal is exempted from income tax.

  6. Ashok says:

    Well as mentioned – The tax savings from your contribution to VPF will only reduce the extent of Rs 1.5.lakhs under 80C deductions. However i do have a Point. After exhausting the 1.5 lacs limit People tend to invest the remaining in Fixed deposits. Which increases your tax burden – as FDs are taxable and its also Taxed as per your Tax slab.
    In that scenario: one can opt for VPF because it has EEE Status.

  7. Ashok says:

    Hi Sultan. Withdrawal of EPF before the completion of 5 yrs is taxable. However it depends on when you started your VPF. VPF amount is credited to the same account as EPF.
    If EPF and VPF both combined together is beyond 5 years – then the entire withdrawal amount becomes Tax free. However withdrawal rules apply. This is what i understood.

  8. Kumar says:

    2.The interest received is exempted up to 9.50% under the Income Tax Act, 1961. Please explain.

    Section 10(11) of Income Tax Act – Payment from Statutory Provident Fund

    Any payment received on statutory provident fund related to employer’s contribution, interest, amount received on termination will be exempted.

  9. sneha says:

    Hi Sir,

    I am claiming my interest on home loan and My 80C and NPS section worth 50,000 are all exhausted . Contributing to VPF can reduce your taxable income ?
    Please guide us

  10. Shailesh Wani says:

    I have the following query
    At this moment, I have VPF deduction of 24% from 1st Apr 2016 (Have completed 2.5 years). I read that VPF contribution if withdrawn before 5 years is taxable. If possible, can you advise me on the following
    1) Is this 5 years is from the date of first VPF contribution or every monthly contribution needs to complete 5 years of duration (For example, I have opened the account on 1st Apr 2016, so i would need to remain invested till 31st Mar 2021 or that every monthly contribution need to complete 5 years individually say Oct 2018 contribution till Sep 2023?). Would the taxability condition alter, if we change the rate of contribution?
    2) What happens of someone stops VPF midway (before the completion of 5 years from the initial contribution) but withdraws only after 5 years, in this case, it will not be taxable. Right?
    3) The completion of 5 years account has to be with one employer or total duration of 5 years from the different employers is also OK
    4) What happens of you stop working as an employee before the completion of 5 years. Because, then you do not remain the salaried employee and hence can not contribute to VPF. Would VPF become taxable? Can you avoid paying the tax by extending the tenure to 5 years (but without paying VPF for partial period)
    5) If I increase my VPF further say from 24% to 36% from 1st Oct 2018, from taxability perspective, would my VPF tenure for this additional contribution be counted from 1st Apr 2016 or from 1st Oct 2018

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