VPF or the Voluntary Provident Fund scheme is a long-term investment option that gives you higher returns along with the low risk factor involved. VPF is being managed by the Government of India and can be opted for by the employees voluntarily. In the case of an EPF scheme, only 12% of the basic salary can be contributed, but the VPF scheme enables the employees to contribute their complete basic salary to this scheme. Notably, the contributions that are made towards VPF do impact the EPF and the contributions made towards EPF do affect the VPF.
Under this scheme, the maximum contribution that can be made is up to 100% of an employee’s basic salary and D.A. however, the interest which is earned by the individual is at the same rate as that of the EPF. Furthermore, the scheme offers good tax benefits to the applicants.
Employees who receive their monthly salary through a specific salary account are eligible for the Voluntary Provident Fund. Also, the VPF scheme is available for salaried people only. This scheme is an extension of the EPF.
To open a VPF account, Form 24 and Form 49 must be submitted. Also, a company registration certificate along with the Ministry of Finance (MoF) shall be submitted. The employee must mention the company profile in detail. Apart from it, a business registration certificate should also be submitted. Furthermore, if the organization is an 'SdnBhd', the memorandum and articles of association are needed to be submitted as well. It is also suggested that the employee must check with his/her employer if any further documents are required for a VPF account.
The VPF account is one of the most entrusted and safe investment option in India. In this scheme, the employees are eligible for tax benefits of up to Rs.1.5 lakh under the Section 80C of the Income Tax Act, 1961. Notably, the interest which is accumulated from the contributions is also exempted from the tax. The amount falls under the tax only in the case when the rate of interest is above 9.50% p.a.
For instance, if Raj earns Rs 30k per month (basic pay + dearness allowance) then his compulsory contribution as per the standard percentage would be Rs. 3600 (30,000 x 12%).
Furthermore, if Raj wishes to deposit Rs.6000 per month to his EPF account, then his Voluntary Provident Fund would be Rs.2400 (6000 – 3600).
In the VPF scheme, the rate of interest which is offered to the individual is set by the Indian Government and it is revised on a yearly basis. Earlier, the rate of interest in this scheme was 8.65% and now it has been decreased to 8.1% p.a. For FY 2021-2022. It is recommended to make investments in the VPF scheme because it offers a higher rate of interest and tax benefits to the individuals which many other schemes fail to offer.
Thus, we can conclude that the Voluntary Provident Fund is a well-recognized long-term investment option for people who seek the least amount of risk and higher returns. The VPF scheme is a safe and secure investment option that offers post-retirement benefits to employees. It is a Government of India scheme, which makes it an even more trusted scheme as compared to others.