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voluntary provident fund

Voluntary Provident Fund in India

Last Update Date : August 12, 2018

VPF Account

Your Employee Provident Fund (EPF) allows you the luxury of saving for your future, without lifting a finger.  Every month an amount gets deducted from your salary and deposited into your EPF account, but consider the cost of living and inflation rate at the time of retirement and perhaps your monthly contribution towards your future may not suffice.  Unless you have added extra long-term savings plans, an easily adoptable long-term savings option is the Voluntary Provident Fund (VPF).  Read this guide to learn how to save more for your retirement years.

What is VPF?

An employee working in the private sector automatically has 12% deducted from his salary and deposited into the Employee Provident Fund(EPF) account, which is set up by his/her employer, to which the employer also contributes.  Above this basic percentage amount, an employee can request his employer to deduct an additional amount every month and add it to his PF account, so that when he/she redeems it at the age of retirement, the amount of funds available is greater.  The interest earned would be the same as EPF and the long-term investment in VPF is as risk free as EPF.

How to Open VPF Account?

Since, a VPF account is an upgraded EPF account, the employee has to simply make a request to his employer.  After requesting the employer to switch his EPF account to a VPF account, the employer must fill out the required forms for the conversion of the account.  The employee must submit his KYC details to the employer, who must in turn submit to the EPFO, mentioning the extra percentage to be deducted and the date of commencement.

VPF Tax Benefits

  1. Easy to Apply – By requesting your employer to deduct an additional amount into your PF, your EPF account becomes your voluntary provident fund account with the submission of the registration form.
  2. Tax Savings – Unless withdrawn before the completion of 5 years, the accumulated amount is tax free and eligible for deductions u/s 80C.
  3. High Interest Rate – The current interest rate for VPF account is 8.55%
  4. Investment Option – Opting for VPF as a long-term investment option is a safe bet, as it has a low risk factor, since it is a government scheme.
  5. Transfer Easily – Upon changing jobs, it is a simple process to transfer your VPF account from one employer to the next.  Additionally, the nominated individual can easily access the funds if the account holder is deceased.
  6. Pension Fund – The monthly contributions will help you during your retirement years with access to funds to maintain your standard of living.

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Difference between EPF, VPF and PPF

While, the most important benefit of Voluntary Provident Fund is the extra amount to your retirement fund, the benefits and differences between EPF, VPF and PPF are outlined below:

Employee

Provident Fund

(EPF)

Voluntary Provident Fund (VPF) Personal Provident Fund (PPF)
Account Employees in India (Salaried Individuals) Anyone except NRI’s
Interest Rate 8.55 8.55 7.9
Tax Benefit u/s 80C Rs 1,50,000 deduction available
Period of Investment Till retirement or resignation 15yrs
Loan Available Partial withdrawals available After 6 years 50% can be withdrawn
Employer Contribution 12% N/A

 

Employee Contribution 12% Voluntary N/A
Tax on Maturity Tax Free Tax Free Tax Free

How to Check VPF Balance?

As your Voluntary Provident Fund is like your EPF, you can use the same methods for checking the balance in your VPF account:

  • Missed call – give a missed call on 011 22 901 406 to check your balance
  • SMS – send EPFOHO UAN <language choice> to 7738299899
  • Online – Login using your credentials on https://unifiedportal-mem.epfindia.gov.in/memberinterface/
  • Umang App – your UAN and Aadhaar number need to be linked for checking balance
  • Mobile App – From the installed App select “Member” and the select “Balance/passbook” and enter your UAN and mobile number

VPF Withdrawal Rules

Your contributions to your VPF account can be withdrawn at any time.  However, if withdrawn before the completion of five years, the amount will be taxed.  You can request withdrawal for any one of the following reasons but not excluding:

  • Medical treatment for self or family members
  • Higher education/marriage
  • Home loan repayments
  • Construction or renovation of home

You can withdraw the funds by simply filling out, through the employer, Form 31, in which your bank details must be filled out and all requested documents attested properly by the present employer.  Upon submission, the amount will be transferred to the mentioned bank account.

Frequently Asked Questions

 1. Is VPF Taxable?

VPF contributions are tax deductible u/s 80c and the amount upon maturity is tax free.

2.  What are VPF Interest Rates?

The interest rate for voluntary provident fund is the same as the employee provident fund. The interest rate is 8.55%

How H&R Block can help you?

For help with your income tax planning and saving needs consult the tax experts at H&R Block India, for the best investment options suited to meet your needs perfectly for a truly golden retirement age.

e-File your tax returns with ease and convenience with H&R Block
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