The VPF is voluntary and available to any employee working in India. Salary deductions are made only with the agreement of salaried employees.
You can achieve your early retirement plan goals by making wise investments, which can also help you generate wealth. Because of the volatility in the equity markets, consumers are looking to government-backed small savings programmes as a way to make some money. One way to do this is to contribute more to the Provident Fund (PF). The VPF, or Voluntary Provident Fund, in such a case can be considered a wise investment in the fixed-income market.
What is the Voluntary Provident Fund scheme?
The voluntary Provident Fund (VPF) is one of the programmes that allow employees to raise their contributions to the Provident Fund in the fixed-income sector (PF). It is accessible to any employee working in India and offers an annual return of 8.10%. People can receive tax benefits under Section 80C of the Income Tax Act by making investments in this plan, and returns on maturity are also not taxed.
(Also Read: Financial planning: Do’s and don'ts of managing your finances)
How should employees invest more in Provident Fund?
VPF is only taken out of your pay if you want it to. By selecting a voluntary provident fund contribution, an EPF account holder can choose to make an additional contribution to their EPF account.
“For this, the employee needs to ask HR at the time of joining. However, in case an employee decides to choose VPF after joining, then he or she needs to inform the HR and accounts department of its recruiter before the beginning of a new financial year," said Kartik Jhaveri, Director — Wealth Management at Transcend Capital.
The employee must also make sure that their yearly contribution, coupled with their monthly EPF and VPF contributions, does not exceed 2.5 lakh per year. The return on the EPF contribution is taxed up to this point.
(Also Read: Rule 72, 114, 144: Know these 3 key investment rules)
To know how much to invest through Voluntary Provident Fund, you can check your EPF contributions from your pay stub or you can determine the required EPF contribution by subtracting 12% from your base wage.
Anyone interested in the VPF programme might offer to donate any amount of his salary to the provident fund. The amount of the contribution must be greater than 12% of the base pay. However, the employer is not required to make any contributions to VPF.
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 "Provident Fund: Want to earn maximum interest on your PF balance? Know about Voluntary PF scheme")
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