Voluntarily Provident Fund (VPF)- The best and Safe instrument to accumulate wealth

VPF (Voluntarily Provident Fund)

The best and Safe instrument to accumulate wealth for salaried Individuals.

VPF or voluntary Provident fund is a great option for salaried to bet on a safe and rewarding option with power of compounding to accumulate wealth in long run. The VPF money goes to normal EPF account., As the limit for EPF is only 12% (Basic Salary + Dearness allowance), so the money which individual wants to accumulate to EPF above this 12% limit has to be deposited as VPF (Voluntary Provided Fund) option provided by the employers.

Only salaried individual can contribute to EPF and VPF, the employee can increase the share of VPF till 88% of (Basic + Dearness Allowance) as 12% of (Basic + Dearness Allowance) is already deducted as a mandatory deduction as part of PF.

It is to be noted that nothing is contributed by the employer if one opts for VPF, it is only in the case of EPF that a contribution from employer has to be done equal to 12% of (Basic + DA)

The VPF has following flexibility and benefits:

• The interest rate is similar to EPF ie. 8.5% in FY 20-21, which is 1.5% then higher than FDs.

• The Amount of contribution is optional for the employee.

• The Interest earned of VPF is tax free alike EPF.

• The more you contribute the more accumulation of funds happens.

• The tenure of VPF is similar to EPF i.e. till retirement.

Other Benefits of VPF are:

Safe investment option and Higher returns: The VPF returns are guaranteed and endorsed by the government and is normally near to 8.5% yearly, the government decides the interest each year for EPF which is applicable to VPF contribution too. The other vehicle like Mutual funds etc. can event deliver higher returns but the same is not guaranteed and can even go to negative trend based on market sentiments, which is based on the logic of high risk and high returns.

Easy to contribute: It is very easy to contribute to VPF, as the employers give an option to employee to define the contribution to EPF, you can connect with HR of your company to method and details of defining for VPF contribution.

Transfer and Withdrawal are easier: The transfer and withdrawal of amount is allowed in certain conditions or resignation from job, Form 31 is required for following withdrawal which is available with organization HRs.

Following are the reasons for which the withdrawal from PF is allowed.

• Terminal illness.

• Marriage or fees for higher education by the employee.

• To buy a land for the house or buying a house.

Considering salaried individual VPF investment should be planned with a focused future goal in long term, the additional power of compounding for the returns makes the returns more lucrative, Please try the SIP calculator on this web portal which can give you an idea if you are planning for future goal of investment.