Voluntary Provident Fund (VPF)

VPF is an additional contribution an employee can voluntarily make over and above the mandatory 12% EPF deduction. While EPF contributions are fixed for both employers and employees, VPF is entirely employee-driven, and the employer does not contribute to this portion.

VPF offers multiple benefits, including:

High Returns: The interest rate is the same as EPF, making it a lucrative investment.

Tax Benefits: Contributions qualify for tax deductions under Section 80C of the Income Tax Act, and interest earned is tax-free up to a specified limit.

Risk-Free & Secure: Since VPF is backed by the government, it is one of the safest long-term investment options.

Compounded Growth: The power of compounding over the years significantly enhances retirement savings.

VPF follows the same withdrawal rules as EPF. While partial withdrawals are allowed under specific conditions such as medical emergencies, home purchase, or higher education, complete withdrawal is typically permitted at retirement or upon leaving employment. Premature withdrawals may be subject to certain tax implications.

Employees can opt for VPF by submitting a request to their employer, typically at the beginning of the financial year. The contributions are deducted automatically from their salary and deposited into their EPF account.

Unlike EPF, where contributions are fixed, VPF contributions are flexible in terms of percentage. However, once an employee opts for VPF, changes or discontinuation may not be permitted until the next financial year, depending on company policies.

VPF is an excellent option for salaried employees who prefer a low-risk, tax-efficient savings plan for their long-term financial goals. However, individuals looking for higher liquidity or higher returns through market-linked instruments may explore other investment options like mutual funds or National Pension System (NPS).