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.
Let’s understand why investing in VPF is such a good tax saving investment option.
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.
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).
The rate of interest is high as compared to the other debt oriented investment options.
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.
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.
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.