VPF meaning benefits and more

VPF or Voluntary Provident Fund is an investment scheme available to salaried individuals who wish to save for their retirement. It is an extension of the Employee Provident Fund (EPF) and offers various benefits to investors. In this article, we will discuss the VPF meaning, benefits, and more.

VPF Meaning

VPF is a voluntary contribution made by employees towards their provident fund account. While the contribution to the EPF is mandatory for both the employer and employee, the contribution to the VPF is optional and made by the employee alone. The contribution to VPF is deducted from the employee’s salary and added to their provident fund account. The contribution rate for VPF is the same as that of EPF, which is currently 12% of the basic salary.

Benefits of VPF

1. Tax benefits: One of the main benefits of VPF is tax exemption. The contributions made to VPF are eligible for a tax deduction under Section 80C of the Income Tax Act. The contribution amount is deducted from the employee’s taxable income, reducing their tax liability.
2. Higher returns: VPF offers a higher rate of interest than other fixed-income investment options. The interest rate on VPF is the same as that of EPF and is currently 8.5% per annum. The interest earned on VPF is tax-free, making it an attractive investment option.
3. Long-term investment: VPF is a long-term investment option as the funds are locked in until retirement. The investment made in VPF earns interest and grows over time, providing a stable income during retirement.
4. Flexibility: VPF offers flexibility in terms of the contribution amount. The employee can choose to contribute any amount above the mandatory 12% of the basic salary. This flexibility allows the employee to save more towards their retirement and build a larger corpus.
5. Safe investment: VPF is a safe investment option as it is managed by the government. The funds are invested in safe and secure avenues such as government securities, bonds, and debentures, ensuring the safety of the investment.
6. Transferable: In case of a change in employment, the VPF account can be transferred to the new employer. This transferability feature ensures that the investment made in VPF is not lost and continues to earn interest until retirement.
7. Loan facility: VPF also offers a loan facility to its investors. The investor can take a loan against their VPF investment in case of a financial emergency. The loan is provided at a lower interest rate than other loan options, making it a cost-effective way to borrow money.

VPF Eligibility

VPF (Voluntary Provident Fund) is an extension of the EPF (Employees’ Provident Fund) scheme, which means that the eligibility criteria for VPF are the same as those for EPF.

In general, the following employees are eligible to participate in the EPF and subsequently the VPF scheme:

1. All employees of an establishment that has 20 or more employees are eligible to join the EPF scheme.
2. Employees who earn less than Rs. 15,000 per month are mandatorily enrolled in the EPF scheme.
3. Employees who earn more than Rs. 15,000 per month can voluntarily opt to join the EPF scheme and subsequently the VPF scheme.
4. Self-employed individuals are not eligible to participate in the EPF and VPF schemes.

It is important to note that eligibility criteria may differ based on the specific rules and regulations of the organization and the state in which it operates. It is recommended to check with the organization’s HR department or the EPFO to confirm the eligibility criteria before opting for VPF contributions.

Documents required to open VPF account

Opening a VPF (Voluntary Provident Fund) account is a relatively simple process, and requires the following documents:

1. Identity Proof: A valid government-issued identity card such as Aadhar Card, PAN Card, Voter ID Card, or Passport.
2. Address Proof: A valid government-issued address proof such as Aadhar Card, Driving License, Voter ID Card, or Passport.
3. Bank Account Details: A cancelled cheque or bank statement that shows the bank account details of the account holder.
4. Employee Provident Fund (EPF) account details: In case the employee is already a member of the EPF scheme, they will need to provide their EPF account number.
5. Employment details: The employee will also need to provide their employment details, such as the name of the employer, employee number, and the date of joining the organization.

It is important to note that the exact documentation required may differ based on the specific rules and regulations of the organization and the state in which it operates. It is recommended to check with the organization’s HR department or the EPFO to confirm the required documentation before opening a VPF account.

VPF Rules and Regulations

VPF (Voluntary Provident Fund) is a voluntary extension of the EPF (Employees’ Provident Fund) scheme, and is regulated by the EPFO (Employees’ Provident Fund Organisation) under the Ministry of Labour and Employment, Government of India.

Here are some of the important VPF rules and regulations that one should be aware of:

1. Eligibility: Only employees who are eligible for the EPF scheme can opt for VPF contributions. This includes employees of an establishment that has 20 or more employees, and those who earn more than Rs. 15,000 per month.
2. Contribution limit: The maximum contribution that an employee can make towards VPF is limited to the employee’s basic salary and dearness allowance. There is no minimum contribution limit.
3. Lock-in period: The lock-in period for VPF contributions is 5 years. Withdrawals from VPF can be made only after completion of the lock-in period.
4. Interest rate: The interest rate offered on VPF contributions is determined by the government, and is usually higher than the interest rate offered by most fixed deposit schemes.
5. Taxation: VPF contributions are eligible for tax deductions under Section 80C of the Income Tax Act. However, withdrawals from VPF are taxed as per the individual’s tax bracket.
6. Nomination: It is important to nominate a nominee for the VPF account to ensure that the investment corpus is passed on to the nominee in case of the account holder’s untimely demise.
7. Transfer: VPF contributions can be transferred from one organization to another, provided the employee is eligible for the EPF scheme in the new organization.

It is important to note that the rules and regulations of VPF may differ based on the specific rules and regulations of the organization and the state in which it operates. It is recommended to check with the organization’s HR department or the EPFO to confirm the specific VPF rules and regulations.

How to invest in VPF

Investing in VPF is a simple process. The employee needs to fill in the VPF declaration form and submit it to the employer. The employer will deduct the contribution amount from the employee’s salary and add it to their provident fund account. The contribution to VPF can be made either through a lump sum payment or through monthly contributions.

VPF is an excellent investment option for individuals looking to save for their retirement. It offers various benefits such as tax exemption, higher returns, long-term investment, flexibility, safety, transferability, and loan facility. Investing in VPF is a simple process and can be done by filling in the VPF declaration form and submitting it to the employer. With its attractive features, VPF can help individuals build a corpus for a financially secure retirement.

VPF tax benefit

VPF or Voluntary Provident Fund is a popular investment option for salaried individuals looking to save for their retirement. It is an extension of the Employee Provident Fund (EPF) and offers various benefits to investors. One of the main benefits of VPF is tax exemption. Let’s understand how VPF offers tax benefits.

Tax benefits of VPF

1. Tax deduction under Section 80C: The contributions made to VPF are eligible for a tax deduction under Section 80C of the Income Tax Act. The contribution amount is deducted from the employee’s taxable income, reducing their tax liability. The maximum amount eligible for deduction under Section 80C is Rs. 1.5 lakhs per annum.
2. Tax-free interest: The interest earned on VPF is tax-free, making it an attractive investment option. The interest rate on VPF is the same as that of EPF and is currently 8.5% per annum. The interest earned on VPF is credited to the investor’s account at the end of each financial year.
3. Tax exemption at maturity: The maturity amount of VPF is also tax-free. The maturity amount includes the principal amount invested and the interest earned. This tax exemption at maturity makes VPF a tax-efficient investment option.
4. No tax on premature withdrawal: In case of premature withdrawal of VPF, the amount received is tax-free if the investor has completed five years of continuous service. However, if the investor withdraws the amount before the completion of five years, the interest earned on the investment is taxable.
5. Tax benefits for salaried individuals: Salaried individuals can claim a tax deduction for their VPF contributions as a part of their salary income. The contribution amount is deducted from the taxable income, reducing the tax liability of the individual.

VPF offers tax benefits to investors, making it an attractive investment option for salaried individuals. The contributions made to VPF are eligible for a tax deduction under Section 80C of the Income Tax Act, and the interest earned on VPF is tax-free. The maturity amount of VPF is also tax-free, and in case of premature withdrawal, the amount received is tax-free if the investor has completed five years of continuous service. VPF is a tax-efficient investment option that can help investors build a corpus for a financially secure retirement.

VPF full form in different languages

VPF contribution process

The process of contributing to VPF is quite simple and straightforward. Here are the steps to contribute to VPF:

Step 1: Check with your employer The first step is to check with your employer whether they offer VPF as an investment option. If your employer offers VPF, they will have a separate option to contribute to it in addition to the mandatory contribution towards EPF.

Step 2: Decide on the contribution amount The next step is to decide on the amount you want to contribute towards VPF. Unlike EPF, there is no mandatory contribution towards VPF. You can decide on the contribution amount based on your financial goals and the tax benefits offered.

Step 3: Fill in the form Once you have decided on the contribution amount, you need to fill in the VPF contribution form. The form can be obtained from the HR department of your employer.

Step 4: Submit the form After filling in the form, you need to submit it to the HR department along with a canceled cheque. The cancelled cheque is required to verify your bank account details.

Step 5: Deduction from salary Once the HR department receives the form, they will deduct the contribution amount from your salary and credit it to your VPF account. The contribution amount will be reflected in your salary slip.

Step 6: Monitor your account It is important to monitor your VPF account regularly to ensure that the contribution amount is being credited correctly. You can also track the interest earned on your VPF account.

In conclusion, contributing to VPF is a simple process, and it can be a great way to save for your retirement. Make sure to check with your employer about VPF, decide on the contribution amount, fill in the form, and submit it to the HR department. Keep a regular check on your VPF account to monitor your contributions and the interest earned.

VPF vs PPF

VPF (Voluntary Provident Fund) and PPF (Public Provident Fund) are both investment options that offer tax benefits and can be used to save for the future. However, there are some key differences between the two that are worth considering before choosing one over the other. Let’s take a closer look at VPF vs PPF.

1. Eligibility VPF is an investment option that is available to salaried employees who contribute to EPF (Employee Provident Fund). On the other hand, PPF is open to all individuals, including self-employed individuals, and does not require any mandatory contribution towards any other fund.
2. Contribution limit The contribution limit for VPF is the same as EPF, which is currently 12% of the basic salary plus dearness allowance (DA). However, employees can contribute more than the mandatory limit towards VPF, up to a maximum of 100% of the basic salary plus DA. On the other hand, the contribution limit for PPF is currently Rs. 1.5 lakh per year.
3. Interest rate The interest rate for VPF is the same as EPF and is currently 8.5% per annum. The interest rate for PPF is decided by the government and is currently 7.1% per annum. However, the interest rates for both VPF and PPF are subject to change every year.
4. Lock-in period The lock-in period for VPF is the same as EPF, which is until retirement or resignation. However, partial withdrawals are allowed after a certain period. The lock-in period for PPF is 15 years, after which the account can be extended in blocks of 5 years.
5. Liquidity VPF offers more liquidity than PPF since partial withdrawals are allowed after a certain period. On the other hand, PPF has a longer lock-in period and does not allow partial withdrawals before the end of the 6th financial year.
6. Tax benefits Both VPF and PPF offer tax benefits under Section 80C of the Income Tax Act. Contributions towards VPF and PPF are eligible for a deduction of up to Rs. 1.5 lakh per year. The interest earned and the maturity amount are tax-free for both VPF and PPF.

Both VPF and PPF are good investment options for saving for the future and offer tax benefits. While VPF is only available to salaried employees and has a more flexible contribution limit and liquidity, PPF is open to all and has a longer lock-in period. It is important to consider your financial goals and needs before choosing one over the other.

VPF vs NPS

VPF and NPS are two investment options that can help individuals save for their retirement. While both have their own advantages and disadvantages, they differ in terms of their features, benefits, and tax implications.

VPF is a scheme that allows employees to make voluntary contributions towards their EPF account over and above the mandatory contribution. It offers a fixed interest rate, tax benefits, and is managed by the Employees’ Provident Fund Organisation (EPFO). On the other hand, NPS is a market-linked investment scheme that offers more flexibility in terms of investment options and offers tax benefits under different sections of the Income Tax Act.

The following table highlights some of the key differences between VPF and NPS:

Overall, VPF is a more conservative investment option with a fixed interest rate, while NPS is a more flexible investment option that offers market-linked returns. It is important to assess individual financial goals and risk appetite before choosing between VPF and NPS.

Note that the information in this table is current as of March 2023 and may be subject to change over time. It is always a good idea to verify the latest information with the relevant authorities or consult a financial advisor before making any investment decisions.

Why should you opt for VPF?

There are several reasons why one may consider opting for VPF:

1. Higher returns: The interest rate offered on VPF contributions is typically higher than the interest rate offered by most fixed deposit schemes. This means that VPF can help individuals earn higher returns on their investment.
2. Tax benefits: VPF contributions are eligible for tax deductions under Section 80C of the Income Tax Act. This means that individuals can claim deductions up to Rs. 1.5 lakh on their taxable income, which can help in reducing their tax liability.
3. Safe investment: VPF is a safe investment option as it is managed by the EPFO, which is a government-backed organization. This means that the investment is relatively low-risk and provides a stable return on investment.
4. Employer contribution: In some cases, employers may also match an employee’s VPF contribution, which can help in increasing the overall investment corpus.
5. Retirement planning: VPF can be a useful investment option for individuals who are looking to save for their retirement. The lock-in period of 5 years ensures that the investment is long-term, and the tax benefits and higher returns can help in building a sizeable retirement corpus.

Overall, VPF can be a valuable investment option for individuals who are looking to save for their future and secure their financial stability. It is important to consider individual financial goals, risk appetite, and investment horizon before opting for VPF.

VPF withdrawal rules

VPF (Voluntary Provident Fund) is a type of investment option that is available to salaried employees who contribute to the EPF (Employee Provident Fund). The VPF contribution is voluntary, meaning that employees can choose to contribute more than the mandatory contribution towards EPF. Withdrawal from VPF is subject to certain rules and regulations, which are explained below:

1. Withdrawal on retirement Employees can withdraw their VPF contribution along with the interest earned on retirement or resignation from their job. The withdrawal amount is tax-free if the employee has completed 5 years of continuous service. If the employee has not completed 5 years of service, the withdrawal amount is taxable as per the income tax slab rate applicable to the employee.
2. Partial withdrawal Employees can withdraw a part of their VPF corpus for specific purposes such as medical treatment, education, purchase or construction of a house, or in case of financial emergencies. The maximum amount that can be withdrawn is the lower of the following:

• 50% of the employee’s own contribution and interest
• 3 months of the employee’s own basic salary and dearness allowance

Partial withdrawal from VPF is allowed only after completing 5 years of continuous service. The employee can make a partial withdrawal only once in a financial year. The withdrawal amount is tax-free.

3. Loan against VPF Employees can also take a loan against their VPF balance for specific purposes such as marriage, education, medical treatment, or purchase or construction of a house. The maximum loan amount is the lower of the following:

• 50% of the employee’s own contribution and interest
• 36 times the employee’s basic salary and dearness allowance

The interest rate on the loan is generally 1-2% higher than the VPF interest rate, and the loan has to be repaid within 36 months. Loan against VPF is allowed only after completing 5 years of continuous service.

4. Premature withdrawal Employees can withdraw their VPF corpus before retirement or resignation, but only under certain conditions such as critical illness or disability. In such cases, the employee has to submit a medical certificate and can withdraw up to 6 months of their own contribution and interest. Premature withdrawal from VPF is taxable.

It is important to note that while VPF offers some flexibility in terms of withdrawal, it is primarily a long-term investment option, and premature withdrawal should be avoided if possible to maximize the benefits of the investment.

VPF contribution limit

VPF (Voluntary Provident Fund) is a type of investment option that is available to salaried employees who contribute to the EPF (Employee Provident Fund). The VPF contribution limit is the maximum amount that an employee can voluntarily contribute towards their EPF account.

The contribution limit for VPF is set by the government and is linked to the basic salary and dearness allowance (DA) of the employee. As of September 2021, an employee can contribute up to 100% of their basic salary and DA towards their VPF account. However, it is important to note that the total contribution towards the employee’s EPF (including both mandatory and voluntary contributions) cannot exceed 1.5 lakh per annum.

For example, if an employee’s basic salary is Rs. 50,000 per month and the DA is Rs. 10,000 per month, their total monthly salary is Rs. 60,000. If the employee chooses to contribute 50% of their salary towards VPF, the maximum contribution they can make is Rs. 30,000 per month. This would take their total EPF contribution to Rs. 45,000 per month, which is within the overall limit of Rs. 1.5 lakh per annum.

It is important to note that the VPF contribution is voluntary and the employee can choose to contribute any amount up to the maximum limit. The employee can also choose to change the contribution amount at any time during their employment.

The VPF contribution is deducted from the employee’s salary before tax, which means that the employee can avail of tax benefits on the contribution amount. The contribution amount, along with the interest earned, is also tax-free on withdrawal after the completion of the lock-in period.

In summary, the VPF contribution limit is linked to the employee’s basic salary and DA, and an employee can contribute up to 100% of these amounts towards their EPF account. However, the total contribution towards the EPF (mandatory and voluntary) cannot exceed Rs. 1.5 lakh per annum.

How to check VPF balance?

Checking the VPF (Voluntary Provident Fund) balance is an important aspect of managing your EPF (Employee Provident Fund) account. Here are the steps to check your VPF balance:

1. Visit the EPFO website Go to the EPFO (Employee Provident Fund Organisation) website at https://www.epfindia.gov.in/site_en/index.php.
2. Click on ‘For Employees’ Under the ‘Our Services’ tab, click on ‘For Employees’.
3. Click on ‘Member Passbook’ Under the ‘Services’ section, click on ‘Member Passbook’.
4. Enter your UAN and password Enter your UAN (Universal Account Number) and password to login to your EPF account.
5. Select the member ID If you have more than one EPF member ID, select the one for which you want to check the VPF balance.
6. Click on ‘View Passbook’ Click on ‘View Passbook’ to view your EPF passbook, which will show the details of your EPF contributions and balance.
7. Check the VPF balance In your EPF passbook, you will see the VPF contribution amount and the interest earned on it separately. The total VPF balance will be the sum of your contributions and interest earned till date.

Alternatively, you can also check your VPF balance through the Umang app or by giving a missed call to the EPFO toll-free number 011-22901406 from your registered mobile number.

It is important to keep track of your VPF balance regularly to ensure that your contributions are being credited correctly and to plan your retirement savings effectively.

VPF calculator

A VPF (Voluntary Provident Fund) calculator is a useful tool that can help you estimate the returns on your VPF contributions over a period of time. It can also help you plan your VPF contributions based on your financial goals and retirement plans. Here’s how you can use a VPF calculator:

1. Go to a VPF calculator website There are several VPF calculators available online, you can choose any of them as per your preference. You can search for “VPF calculator” on your preferred search engine to find one.
2. Enter your basic salary and DA In the VPF calculator, enter your basic salary and DA, which will determine the maximum amount you can contribute towards VPF.
3. Enter the contribution amount Enter the amount you want to contribute towards VPF, which can be any amount up to the maximum limit based on your basic salary and DA.
4. Choose the investment period Select the investment period, which is the number of years for which you want to make contributions towards VPF. It is important to note that VPF has a minimum lock-in period of 5 years, after which you can withdraw the accumulated balance.
5. Enter the expected interest rate Enter the expected interest rate on your VPF contributions. The interest rate on VPF is fixed by the government and is subject to change every year. As of September 2021, the interest rate on VPF is 8.5% per annum.
6. Calculate the returns Once you enter all the required details, the VPF calculator will calculate the returns on your contributions, including the principal amount and the interest earned. The calculator will show you the total amount accumulated in your VPF account at the end of the investment period.

Using a VPF calculator can help you understand how your contributions will grow over time and the impact of different interest rates on your returns. It can also help you make informed decisions about your VPF contributions based on your financial goals and retirement plans.

FAQs on VPF

Conclusion

In conclusion, VPF is a useful scheme that allows employees to make voluntary contributions towards their EPF account. It can help employees save more towards their retirement and secure their financial future. VPF contributions are tax-deductible and the interest earned on the contributions is tax-free, making it an attractive investment option for many employees.

However, it is important to note that VPF has a minimum lock-in period of 5 years, and partial withdrawals are only allowed for specific purposes. It is also important for employees to understand the difference between VPF and PPF and choose the investment option that best suits their financial goals and retirement plans.

Using a VPF calculator can help employees understand the potential returns on their contributions and make informed decisions about their investment. Employees can increase or decrease their VPF contributions by submitting a request to their employer.

Overall, VPF is a valuable investment option for employees looking to save more towards their retirement and secure their financial future.