Employees’ Provident Fund Organization (EPFO) provides many facilities to its subscribers. In this, apart from the regular deduction of 12 percent from the basic salary of the employee, there is also the facility of investment. What are the rules for investing more in PF and it is very important for the employee to be aware of tax exemption and other benefits on it.
New Delhi. Rajiv Kumar, a resident of Jaipur, has started a job recently after completing his studies. As much as Rajiv is curious about his first salary, he is equally eager to open a PF account and start saving for the future.
Rajiv has been told that 12 percent of his basic salary will be deducted and deposited in the PF account, while his company will also contribute 12 percent on its behalf. Since then, a question is swirling in Rajiv’s mind that if he wants to create a bigger fund for the future, then he can increase his contribution in PF and in doing so, how much interest will be received on the higher deposit amount. Like Rajiv, these questions must have come in the mind of many employed people, so today we will know the whole thing about it from the expert.
Employees can increase the amount as per their wish
Investment advisor Jagdish Thakkar explains that any employee can deposit more than the fixed limit of 12 percent in his PF account. This scheme is called Voluntary Provident Fund ie VPF. The employee can increase the contribution in the PF account from the monthly salary by informing his employer. If he wants, he can deposit 100 percent of his total basic salary in the VPF account.
How much interest will you get
Equal interest is paid by EPFO on VPF account as well as PF account. For example, if the government is paying 8.1 percent interest annually on your PF account, then the same interest will be paid on the VPF account. Yes, one thing is to be kept in mind that only the employee can increase the contribution in VPF on his behalf, this rule will not apply to the employer and he will continue to contribute only 12 percent to your PF account.
VPF tax exemption and benefits
Voluntary Provident Fund (VPF) account is also eligible for tax exemption like Employees’ Provident Fund (EPF) account, but only Rs 1.5 lakh in a financial year can be claimed tax exemption under section 80C of Income Tax Act. . Money received from EPF and VPF and withdrawal made after completion of 5 years of service is not taxable.
Apart from this, VPF funds can also be transferred like EPF on change of job. The entire amount of this fund can be withdrawn only on retirement. Partial amount can be withdrawn from this account after 5 years of service. There is also an online claim facility for withdrawal of money.
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