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.
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.
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.
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:
|Voluntary Provident Fund (VPF)||Personal Provident Fund (PPF)|
|Account||Employees in India (Salaried Individuals)||Anyone except NRI’s|
|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|Loan Available||Partial withdrawals available||After 6 years 50% can be withdrawn|
|Tax on Maturity||Tax Free||Tax Free||Tax Free|
As your Voluntary Provident Fund is like your EPF, you can use the same methods for checking the balance in your VPF account:
Your contributions to your VPF account can be withdrawn at any time. However, if withdrawn before the completion of five years, the amount will be taxed.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:
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.
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%
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.