VPF: Unlike EPF, there is more benefit on contribution in Voluntary Provident fund. Because, this investment has no limit. However, interest on investments above Rs 2.5 lakh is taxable.
VPF: Provident fund is very useful for the salaried person. In this, the employee invests a part every month from his salary. At the same time, the employer also deposits the same part in the employee’s account. But, there is one more option from which double benefit can be taken in Provident Fund (EPF). Voluntary Provident Fund is a kind of provident fund. But its terms, limits and conditions PF are different.
You can deposit up to 100% of the basic in VPF
In the Provident Fund, 12-12 per cent of the basic salary + DA of the employee is deposited. Out of 12 per cent contribution of the employer, 8.33 per cent goes to the Employee Pension Scheme (EPS). If the employee wants to increase his contribution to the Provident Fund (EPF) by keeping his inhand salary low, then this option is called Voluntary Provident Fund (VPF). In VPF, the employee can also deposit up to 100% from his salary.
How is investment done?
To take advantage of VPF, the employee has to contact the HR of his company. If the company provides the facility of VPF, then the HR department will start your investment according to the company’s policy. Usually the VPF account is attached to the existing EPF account of the employee. After the completion of all the process, the VPF contribution of the employee will start. However, it can be started only at the beginning of the financial year. The money deposited in VPF can be increased or decreased every year. However, the employer is not obliged to increase his contribution under VPF.
Is VPF taxed?
Loan can also be taken against VPF. Loans can also be taken from this for expenses like children’s education, home loan, children’s marriage. However, under the new rule, if the contribution of EPF and VPF together exceeds 2.5 lakh in a financial year, then the income earned as interest on the additional amount will be taxable. Meaning if you have deposited 3 lakh rupees annually, then the interest earned on 50 thousand will be taxed at the rate of your tax slab.
What are VPF benefits?
- The same interest is available on VPF account as EPF.
- VPF gets the benefit of tax deduction under section 80C of the Income Tax Act.
- Like EPF, investment made in VPF account also comes under EEE category, i.e. investment in it, interest earned on it and money received on maturity is completely tax free.
- VPF account information can also be seen on the EPFO website.
- Withdrawal of money can be claimed online.
- Like EPF, VPF account also has a lock-in period, which happens only on the retirement or resignation of the employee (whichever is earlier).
- For partial withdrawal of money from VPF account, it is necessary for the account holder to work for five years. If not, tax is deducted.
- The entire amount of VPF can be withdrawn only on retirement.
- VPF funds can also be transferred like EPF on change of job.
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