Voluntary Provident Fund (VPF) 2024
The Voluntary Provident Fund (VPF) is a savings scheme for salaried employees, providing an option to contribute additional amounts to their Provident Fund (PF) over the mandatory Employee Provident Fund (EPF) contributions.
What is VPF?
The VPF is an extension of the EPF, allowing employees to contribute more to their provident fund account beyond the mandatory EPF contributions. Unlike EPF, where the contribution rate is fixed, VPF allows employees to decide their monthly contribution.
Key Features:
- Interest Rate: 8.25% per annum.
- Risk Level: Minimal risk due to government backing.
- Flexibility: Easy transfer of VPF balance when changing jobs.
- Account Opening: Simple process.
Tenure:
- Up to retirement or resignation.
Interest Rate:
- 8.25% per annum.
Investment Amount:
- Depends on the employee's contribution.
Maturity Amount:
- Varies based on the investment amount.
Benefits of VPF
- Safe Investment: Government-backed, providing a secure investment option.
- High Interest Rate: Offers competitive interest rates. Interest earned is tax-free.
- Ease of Application: Opening a VPF account is straightforward, typically requiring submission of a registration form to the employer.
- Simple Transfer: Easy to transfer the VPF account when changing jobs.
Tax Benefits
- Under Section 80C of the Income Tax Act: Employees can claim tax benefits of up to ₹1.5 lakh for contributions to VPF.
- Interest Exemption: The interest earned is tax-exempt, but if the interest rate exceeds 9.50% per annum, the excess amount will be taxable.
Interest Rate Comparison
| Financial Year | PPF Rate (%) | VPF Rate (%) |
|---|---|---|
| 2023-2024 | 7.10 | 8.25 |
| 2021-2022 | 7.10 | 8.10 |
| 2019-2020 | 7.10 | 8.50 |
| 2018-2019 | 7.60-8.00 | 8.65 |
| 2017-2018 | 7.60-8.00 | 8.55 |
| 2016-2017 | 8.00-8.10 | 8.80 |
| 2015-2016 | 8.70 | 8.80 |
| 2014-2015 | 8.70 | 8.75 |
| 2013-2014 | 8.70 | 8.75 |
Rules and Regulations
- Contribution Limits: Employees can contribute up to 100% of their basic salary and dearness allowance. Contributions are voluntary.
- Interest Rate: Set annually by the Indian Government and can fluctuate.
- Withdrawal: Full maturity amount can be withdrawn at retirement or resignation. The account balance can also be transferred to a new employer. In case of the account holder's death, the amount is given to the nominee.
- Eligibility: Only salaried employees with an EPF account can open a VPF account. Individuals in the unorganized sector are not eligible.
- Account Opening: Can be opened anytime during the financial year. Contributions are locked in for a minimum of 5 years.
Partial Withdrawals:
- Loans can be taken against the VPF account, but premature withdrawals are taxable.
Withdrawal Process
For financial emergencies, employees can withdraw from their VPF account by:
- Filling out Form-31: Available from the employer’s HR department or the government portal.
- Providing Details: PF number, postal address, bank details.
- Submitting Documents:
- Canceled Check: For bank account verification.
- Self-Attested Documents: All submitted documents must be self-attested.
Reasons for Withdrawal:
- Medical expenses.
- Marriage or higher education.
- Purchasing or constructing a house.
FAQs on VPF
What is the interest rate on VPF?
- The current interest rate is 8.25% per annum.
What is the maximum and minimum amount that can be invested in VPF?
- There is no upper or lower limit. Employees can contribute up to 100% of their basic salary and dearness allowance.
What is the difference between VPF and EPF?
- EPF contributions are mandatory at 12% of the basic salary and dearness allowance. VPF contributions are voluntary and can be up to 100% of the basic salary and dearness allowance.
How much can I withdraw as a loan against my VPF account?
- Partial and full withdrawals are permitted, but premature withdrawals before five years of the account's activation may be subject to taxes.
Who should consider opening a VPF account?
- Ideal for individuals seeking a secure, long-term investment, especially those nearing retirement or wanting a robust pension fund.
If I change jobs, will my VPF account be affected?
- No, the VPF account can be transferred to the new employer.
Can I stop contributing to my VPF account mid-year?
- No, contributions cannot be stopped mid-year once the VPF account is created.
For more details, consult your employer or visit the official government portal for Provident Fund information.
