VPF: If the employee wants to increase his contribution to the provident fund by keeping his inhand salary low, then there is an option.
Organized sector companies under the purview of EPFO have to provide benefits of EPF (Employee Provident FUnd) to their employees. The contribution from both the employer and the employee in EPF is 12-12% of the employee’s basic salary + DA. Of the employer’s 12 per cent contribution, 8.33 per cent of the Employee Pension Scheme goes to EPS. If the employee wants to increase his contribution to the provident fund by keeping his inhand salary low, then there is an option. This option is of the Voluntary Provident Fund (VPF).
PF contribution above 12 per cent is called by VPF employee. If an employee in VPF can choose to contribute up to 100% of his basic salary. The VPF facility is for salaried employees only.
How is investment?
To take advantage of VPF, the employee has to contact HR of his company that he wants to increase his PF contribution. If the company provides the facility of VPF, then the HR department will take steps according to the company’s policy. The VPF account is usually attached to the employee’s existing EPF account. The VPF contribution of the employee will start after all the process is completed. This process usually takes place at the beginning of the financial year. The contribution of VPF can be revised every year. However, under the VPF, there is no restriction on the employer to make a higher contribution to the EPF at the same level as the employee.
- VPF account also gets the same interest as EPF.
- VPF gets the benefit of tax deduction under Section 80C of Income Tax Act. Like EPF, investment made in VPF account also falls in the EEE category, that is, the investment in it, the interest on it and the money received on completion of the maturity period is completely tax free.
- VPF account information can also be seen on EPFO website.
- Also, a claim can be made online for withdrawal of money.
- Like EPF, VPF account also has a lock-in period which is the retirement or resignation of the employee whichever is earlier.
- For partial withdrawal of funds from VPF account, it is necessary for the account holder to work for five years, otherwise tax is deducted.
- The entire amount of VPF can be withdrawn only on retirement.
- VPF funds can also be transferred like EPF if you change jobs.