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Home / Money / Why VPF (Voluntary Provident Fund) is a good option? 10 rules you should know

With interest rates on fixed deposits remaining low and the government gradually lowering the interest rate on small savings schemes like public provident fund, VPF or Voluntary Provident Fund remains a good bet in the fixed income space, say experts. Under VPF, an employee can increase share of EPF contribution, but the employer won’t exceed the threshold of 12% of basic pay. The additional amount you contribute, beyond the threshold set by the Employees’ Provident Fund Organisation (EPFO), goes into VPF.

Here are 10 things to know about VPF

1) An employee has the option to invest up to 100% of your basic salary plus dearness allowance in VPF.

2) VPF matches the Employees Provident Fund (EPF) interest rate and as the name signifies it is deducted from your salary, only if you want it to.

3) Retirement fund body EPFO will provide 8.5% rate of interest on employees' provident fund(EPF) for 2019-20.

4) Currently, popular small savings scheme PPF fetches 7.1% interest rate.

5) VPF/EPF rates are revised annually at the end of the financial year but PPF rates are revised quarterly.

6) Contributions to VPF are eligible for tax deductions under Section 80C.

7) Under income tax laws, the interest earned and maturity proceeds of VPF are tax free. VPF fund withdrawal rules are the same as that of EPF.

8) It should be noted that VPF withdrawal before completing 5 years of continuous service becomes taxable.

9) The VPF is linked to Universal Account Number (UAN) and when you change jobs you can move your VPF funds.

10) One can also avail advances against the VPF balance for select purpose like purchase of house/flat/construction of house including acquisition of site.


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