Last updated – 01.02.2022
What is VPF
Voluntary Provident Fund (VPF) is an extension of the Employees Provident Fund (EPF) in which you can control the periodic contributions to the account. VPF is attached to your EPF account, so you don’t need to start a separate account.
In EPF, an employee can contribute up to 12% of his basic salary and DA to the EPF account but in VPF you can contribute up to 100% but your minimum contribution should be more than the default limit of 12%.
For example, If your salary is Rs. 20,000 and you are contributing Rs. 2,400 per month to your EPF account, then you can get a chance to contribute up to Rs. 20,000 using the VPF.
Current VPF Interest Rate 2022
Since VPF is an extension facility in EPF, the same EPF interest rates are applicable.
The current VPF interest rate is 8.5%
The government has recently reduced the interest rate to 10 BPS.
Last 5 years interest rates are as below.
|Financial Year||Interest Rate (%)|
Also read – EPF Interest Rates 2021
#1. VPF Contribution Limit
VPF scheme enables you a minimum contribution of above 12% to as maximum as 100%. Only salaried employees having an EPF contribution facility can avail of the benefits of VPF contribution.
Employers can’t contribute under the VPF scheme.
#2. VPF Withdrawal Rules
There’s a locking period of 5 years in VPF (same lock-in period as EPF). You would need to pay taxes if you withdraw before 5-year completion attracts taxes.
You can withdraw a VPF complete amount when you retire or resign from your job.
However, you can also get loans against your VPF account.
There are certain conditions that permit you to withdraw VPF money. These conditions are as below.
- Medical treatment
- Child’s education
- Marriage of self, children or siblings
- Construction or buying a home.
#3. VPF Tax Benefit
You can get tax deductions up to Rs1.5 lakh under section 80 (C) of the Income Tax Act. Sections 10(11) and 10(12) of the Income Tax Act 1961, describes the exemption on the amount added to the provident fund.
The interest accrued on the contributed amount is also tax-free.
In other words, VPF comes under the EEE (Exempt-Exempt-Exempt) tax regime. In which, you get tax exemptions at all three stages given below.
E – Tax exemption on investments up to Rs 1.5 lac per year
E – Interest earned is also exempted from tax.
E – The maturity amount is again exempted from tax.
But, any funds withdrawn before five years will attract taxes.
PPF vs VPF
PPF and VPF both are safe investment instruments from the government of India. You can invest for long term purposes like retirement in these instruments.
Both look similar in their abbreviations but they work in different ways. Let’s compare the major points.
|Rate of Interest (2020-21)||7.10%||8.50% (similar to EPF)|
|Investor||Any indian citizen looking for long term investment||Salaried employees of the recognized organizations who are availing EPF benefits|
|Minimum investment limit||Rs 500 in a year||Above 12% of the basic salary|
|Maximum investment limit||Rs 1,50,000 a year||100% of salary|
|Lock-in period||15 years (can extend in a block of 5 years)||Min. 5 years up to retirement|
Also read – PPF Interest Rates 2021
How to Open VPF Account
You can approach your HR/Accounting team of your company and ask them to raise a request to start VPF contributions against your EPF account. Your EPF account will be annexed with VPF details, so you won’t need any separate VPF account.
#1. How are VPF and EPF different from each other?
VPF is an extended version of EPF. The main difference between EPF and VPF is that in EPF you can contribute up to 12% of your salary, while in VPF your minimum contribution should be above 12% that goes up to 100% of your salary.
#2. When can I start the VPF contribution?
You can start VPF contributions only at the beginning of a financial year. You can’t start or stop VPF contributions in between.
Once started, you have to complete the financial year to stop the voluntary contributions.
#3. Who can apply for VPF?
Any salaried employee in a registered company where he is already paying the EPF contributions or he is going to start the EPF account.
A business owner or a public sector employee covered under GPF/CPF schemes cannot apply for VPF.
#4. How can I track my VPF Balance?
You can download the UAN passbook and you can see the VPF credit amount in the particular section.
VPF contributions deducted from your salary is credited to PF account in the following month.
#5. What is UAN?
UAN is a Universal Account Number provided by EPFO to the EPF contributor employee to access their online portal for various types of work.
You can ask your employer or HR to get your EPF/VPF UAN. Once you received, you can then use this UAN number to access all the services related to your EPF/VPF account.
Also read – NSC interest rates in India.
You can enhance your investment speed by starting a VPF contribution along with your EPF seed. This will improve your investment growth rate by saving an extra chunk of your salary.
What are your thoughts on VPF account, do let me know in the comments.