In this article, we cover all the important aspects of Voluntary Provident Fund (VPF)
VPF or Voluntary Provident Fund as the name suggests is a voluntary contribution of a certain amount by an employee in his/her Voluntary Provident Fund account. VPF is similar to Employee Provident Fund but does not have any contribution rate upper ceiling, this means that the maximum contribution limit is just not limited to 12% but 100% of the employee basic wage and dearness allowance (Basic +DA). VPF or VRF (Voluntary Retirement Fund) is the best retirement tax saving scheme to date. However, it shall be noted that the employer has no legal obligation to contribute towards VPF or VRF. Once an employee starts contributing towards VPF or VRF it cannot be terminated or discontinued before 5 years of base tenure. The interest rate of the Voluntary Provident Fund or Voluntary Retirement Fund is decided by the Government of India at the starting of each financial year.
Every salaried individual who is the company’s payroll can contribute to Voluntary Provident fund or Voluntary Retirement Fund.
In case if you withdraw the fund amount from VPF (Voluntary Provident Fund) before 5 years (min. Tenure) then you need to pay tax on the amount withdrawn. The employee can withdraw a partial amount from VRF/VPF as a loan. Moreover, in case of the death of an employee, the nominee gets the fund accumulated in the VPF/VRF account.
In case of any financial emergency, the employee is free to withdraw the fund from the Voluntary Provident Fund. These financial emergencies can include anything such as
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