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VPF Investment Option - Most Underrated!

What is the Voluntary Provident Fund ( VPF)?

Voluntary Provident Fund (VPF) is the additional contribution by the salaried employees to their EPF account apart from what is deducted under Employees Provident Fund ( EPF) scheme and contributed to Employees' Provident Fund Organization (EPFO). The maximum contribution possible through VPF is 100% of your Basic + Dearness Allowance (DA).

How to start your Voluntary Provident Fund ( VPF)?

The process of starting your VPF contribution is extremely simple. You just need to write to your company HR asking them to start your contribution to this Voluntary Provident Fund ( VPF) by additional deduction from your salary. There might be some form they ask you to fill and sign it for acknowledgment but nothing more than that.

Do we need to open a separate account for Voluntary Provident Fund ( VPF)?

The answer is NO. Your additional VPF deduction will be taken care of by your existing EPF account. All details remain the same and you can just track your additional investment with your current EPF account.

Why Voluntary Provident Fund ( VPF) is an excellent Investment Option?

VPF Investment is backed by govt and it is a completely safe investment
The high-interest rate on your investment. The current rate of interest is 8.5%.
On maturity, returns are completely tax-free
Excellent retiral investment option as deduction happens automatically from your salary
Certain restriction in withdrawal help your fund to grow over a period of time
The process to invest in VPF is very simple, just one communication to your company HR
You can track your investment online
Money grows exponential due to compounding of interest and also increase in your income over a period of time

Who should opt for Voluntary Provident Fund ( VPF)?

VPF investment is advisable for all and also at an early stage. Few cases where you want to show a high take-home salary as you are planning to apply for a loan, you may differ it for some time till you get your loan sectioned. However, if you are in a high salary bracket and sectioning of the loan based on your take-home salary is not an issue at all then you should go for it without thinking twice.

How much VPF deduction we should go for?

Below are the few scenarios which decide on how much % of your basic you should go for VPF deduction:

Exhuast Your 1.5 lac under 80C

VPF deduction is eligible for tax deduction under 80C. If your current EPF deduction is not able to meet 1.5 lacs of the maximum limit under 80C, then you should opt for VPF additional deduction at least to meet that 1.5 lacs limit.

Park Your Surplus Fund:

In case you have surplus cash left after you monthly expense and certain emergency savings and you want to park a certain amount of money on monthly basis for the long term then you can opt for this VPF deduction as this is an extremely safe and high return option with a view that there is no tax on the final matured amount.

Retirement Plan:

If you have exhausted your 80 limit through EPF deduction and also you don't want to go for maximum VPF deduction i.e. 100% of your Basic plus DA due to your liabilities or expenses then you should at least go for a small amount of deduction as per your financial stability. It may be 10% to 100% anywhere in between and in the small amount set aside regularly give your retiral fund in crores due to the power of compounding interest on your savings.

Benefits of Investing in VPF :

Good financial stability at the age of retirement
High-Interest Rate. The current prevailing rate is 8.5% per annum.
Your complete retiral amount is tax-free
Your contribution to EPF is eligible for tax benefits under section 80C
Zero Risk- As this is controlled by the Govt of India
The minimum investment amount can be decided by you and also the time of investment when you want to start it
Online tracking of corpus and interest paid

For any further suggestions or inquiries you can leave your comment in the post section, I would be happy to answer it for you.