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Voluntary Provident Fund: Voluntary Provident Fund (VPF) is an option for additional investment in the existing EPF account, which gives 8.25 percent annual interest. It is safe, tax-friendly and beneficial for long term investors.
The interest rate of EPF has been fixed at 8.25 percent for the financial year 2024–25 and financial year 2025–26 and the same rate is also applicable on Voluntary Provident Fund. This interest rate is higher than the fixed deposits (FD) of many banks.
Tax exemption up to Rs 1.5 lakh
Under Section 80C of the Income Tax Act, exemption of up to Rs 1.5 lakh is available on the amount deposited in Voluntary Provident Fund. If your EPF and VPF contribution in a year is less than Rs 2.5 lakh, then the interest will be tax-free. For government employees this limit is up to Rs 5 lakh. Withdrawals after 5 years of continuous service are also tax free.
Extra amount gets added to your EPF account
To invest, all you have to do is tell your HR or payroll team how much extra amount you want to add every month. This amount is directly added to your EPF account.
Liquidity is less in VPF
This investment is for long term and has less liquidity. If you need money quickly, do not put too much money in the Voluntary Provident Fund. But if you want safe, stable and tax-friendly investments, then Voluntary Provident Fund is a great option for retirement planning.
