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Voluntary Provident Fund

The document discusses voluntary provident funds (VPF), which allow employees to make additional voluntary contributions to their provident fund accounts beyond the mandatory 12% contribution. VPF contributions are capped at 100% of an employee's basic salary and dearness allowance and earn the same interest rate as EPF funds. Once a VPF contribution is chosen, it cannot be terminated before 5 years. VPF offers tax benefits and can help employees save for major life events.

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128 views1 page

Voluntary Provident Fund

The document discusses voluntary provident funds (VPF), which allow employees to make additional voluntary contributions to their provident fund accounts beyond the mandatory 12% contribution. VPF contributions are capped at 100% of an employee's basic salary and dearness allowance and earn the same interest rate as EPF funds. Once a VPF contribution is chosen, it cannot be terminated before 5 years. VPF offers tax benefits and can help employees save for major life events.

Uploaded by

healthcare.narayana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Voluntary Provident Fund

1. What is Voluntary Provident Fund?


Voluntary Provident Fund (VPF) Voluntary Retirement Fund is the voluntary fund
contribution from the employee towards his provident fund account. This contribution is
beyond the 12% of contribution by an employee towards his EPF. The maximum contribution
is up to 100% of his Basic Salary and Dearness Allowance. Interest is earned at the same rate
as the EPF.
Employers are under no obligation to contribute to their employees’ VPF portfolio. Likewise,
an employee is also under no obligation to contribute to the Plan. Once the contribution is
chosen in VPF, the same cannot be terminated or discontinued before the base tenure of 5
years completed. The interest rate of Voluntary Retirement Plan is decided by the
Government of India at the start of each financial year.

2. Who can invest in Voluntary Provident Fund?


A VPF is an extension of the EPF. The VPF option is available only to salaried
individuals who receive their monthly payments through a specific salary account.

3. Benefits of Voluntary Provident Fund


The VPF falls under the EEE category ( EEE – exempt on contribution; exempt from the
principal; exempt on interest) making it an excellent tax saving option. It also helps the
employee amass a sizeable savings portfolio and help him during big life milestones.

4. Contribution to Voluntary Provident Fund cannot start or stop during the Financial
Year: If you are planning to contribute to Voluntary Provident Fund then you need to inform
your organization at the beginning of financial year. You cannot start contributing in between
the FY. Secondly, once you opted then you cannot back out or stop your contribution during
Financial Year. You have to compulsorily complete cycle of financial year. I would like to
add that technically it is feasible for organizations to start and stop VPF contribution during
financial year

5. FAQs on Voluntary Provident Fund

Q: How are VPF and EPF different from each other?


A: VPF is the extension of EPF. In an EPF account, a person has to mandatorily give 12% of
his Basic Salary and Dearness Allowance towards the fund. In a VPF, it is a voluntary
contribution with the maximum limit at 100%.

Q: Who is eligible to open a VPF account?


A: All employees who are on a company’s payroll are eligible to open a VPF account.

Q: Will my VPF account get affected if I change jobs?


A: The VPF account is linked to your Aadhar Card. So, it is very easy to transfer your
account from one employer to another.

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