Voluntary Provident Fund (VPF); Meaning, Eligibility and Benefits

All About Voluntary Provident Fund

In this article, we cover all the important aspects of Voluntary Provident Fund (VPF)

Benefits of VPF (Voluntary Provident Fund)

1. Tax Benefits

• • As per section 80C of Income Tax Act 1.5 Lakh INR contribution amount is deductible annually
  • As per the Income Tax Act, up to 9.5% of interest received is exempted
  • The maturity amount of VPF is tax-free

2. Risk-free Investment Option

• • VPF is considered as the Risk-free investment option as it is managed by the Government of India directly and has a fixed rate of interest.

3. Easy to Open

• • Any employee can open a VPF account by approaching to his employer and can enter the amount of VPF contribution in his basic KYC form. Then EPF account will serve the purpose of the VPF account too.

4. Loan Facility

• • An employee registered in VPF can also avail of the loan facility provided by the government to the VPF Account holder. He/She can take a loan for any purpose such as a child’s marriage, child’s education or home loan repayment.

5. High returns

• • The returns are considerably high when compared with other debt-oriented investment plan. Currently, the interest rate under the Voluntary Provident Fund is accrued at 8.65% P.A.

6. Easy Transfer

• • In case of change of employment, the Voluntary Provident Fund amount does not get affected as every employee has a Unique Account Number (UAN) that is linked with EPF Account.

Withdrawal of VPF or VRF

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 Tenure) then you need to pay tax on the amount withdrawn.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

• Medical bills payment
• Child’s marriage and education
• Purchase of new land or construction of house