new Delhi. Employment Provident Fund (EPF) is the preferred investment option of salaried employees in the country. The investment made in it is tax free investment. In this, tax benefits are also available under Section 80C of the Income Tax Act (IT Act). In fact, most companies deduct a part of your salary and transfer it to your EPF account. Also, companies also put the same portion in their accounts on their behalf. However, there is a fixed investment limit in EPF. If you want to increase contribution to EPF, you can do so through Voluntary Provident Fund (VPF).

Through VPF, you can deposit more money in your EPF account every month. The company deducts 12 percent of the basic salary every month and deposits it as your contribution to the EPF. Also, companies also deposit 12 per cent of the amount in their EPF account on their behalf. 8.33 per cent of this goes to the Employee Pension Scheme (EPS), which is limited to a maximum basic salary of Rs 15,000 or Rs 1,250. This is a mandatory requirement under the Employees Provident Funds and Miscellaneous Provisions Act, 1952.

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In VPF, the rate of interest declared on EPF is the same Monthly Contribution and the interest involved with the passing of time prepares a Retirement Fund for your retirement. Apart from your contribution of 12 per cent, you can directly deposit more part of your salary in EPF account. This additional voluntary contribution will be treated as Voluntary Provident Fund. Your additional investment will also be entitled to interest declared by the EPFO for the EPF scheme every year. Like the EPF, tax benefits will also be available on this. Also, the same rules of withdrawal will apply to it.

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Tax is not charged on interest and maturity amount
Understand the benefits of VPF in simple terms, your contribution will not only be benefited under Section 80C, but there will be no tax on the interest accumulated during the period of investment. Also, the amount of maturity will also be tax-free. Simply put, VFF is an extension of your EPF scheme. In this, tax, exemption is given on all three investment, accrual and maturity status. Now the question arises that why should be invested in VPF instead of any other option. Explain that usually the declared interest rate of EPFO is higher than other debt instruments. Apart from this, it is also safe, because behind it is the support of the central government.

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This is how retirement funds increase from VPF
Tejal Gandhi, the founder of Money Matters, says that due to compound interest, your retirement fund increases drastically. For example, suppose your basic salary is Rs 50,000 and your EPF contribution becomes Rs 6,000 a month. You have 20 years to retire. Keeping all these things in mind, your retirement fund will be Rs 67.4 lakh at an interest rate of 8.5 percent. However, if you invest more than 4% of your basic salary as VPF contribution, then this fund will be Rs 79.94 lakh, which is more than Rs 12.54 lakh.

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Start talking to the company to do voluntary provident fund
Any employee can start contributing to VPF through his company. Many companies also provide online facility for this. There is no need of KYC for this. Being voluntary, you can start or stop contributing to VPF at any time. Also, according to your convenience and need, you can increase the amount of contribution every month. However, some companies give an opportunity for this only at the beginning of the financial year. In such a situation, you will have to know this from your company. If your EPF investment does not reach the limit of Rs 1.5 lakh of Section 80C, then VPF can fill this gap.

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You can withdraw money from your VPF
Generally, the employee should withdraw money from his EPF and VPF at the time of retirement. Any partial withdrawal supersedes your retirement planning. Still, if you need money, you can do so for some special purpose. In this, you can use this money to buy your house, repair home, renovation, serious illness, marriage of your siblings or children and higher education of children. In such a situation, make sure that you invest the same money in VPF, which you do not have to use in future.