Voluntary Provident Fund (VPF)

Looking for a safe and tax-saving way to grow your money? The Voluntary Provident Fund (VPF) is a great option for salaried employees in India. It’s an extended version of the EPF (Employees’ Provident Fund), and it helps you save more for your future.

Let’s break down what VPF is, its benefits, interest rate, and how you can start investing in it.

What is VPF?

The Voluntary Provident Fund (VPF) allows employees to make additional contributions to their EPF account beyond the mandatory amount. Participation is optional, but it offers a safe, government-backed investment with an 8.25% interest rate. Employees can contribute up to 100% of their basic salary and dearness allowance, boosting their retirement savings.

• You can contribute up to 100% of your basic pay + DA.
• It’s optional, and your employer is not required to contribute extra.

It’s a simple and risk-free way to build wealth over the long term.

 VPF Key Highlights

• Who can invest? Only salaried employees who are already part of EPF.
• Max contribution: Up to 100% of basic salary + DA.
• Interest rate: Same as EPF (currently around 8.25% p.a.).
• Tax benefits: Eligible for Section 80C deduction.
• Risk: Very low – backed by the Government of India.
• Lock-in: Funds stay till retirement or resignation, with partial withdrawal options.

VPF Interest Rate 

For the current financial year, the VPF interest rate is 8.25% per annum. The rate is set by the government and is the same as EPF.

Interest is calculated yearly and added to your EPF account at the end of the financial year.

Benefits of Voluntary Provident Fund

Required Documents for Opening a VPF Account

To open a Voluntary Provident Fund (VPF) account, employees need to provide the following documents:

• A copy of the company’s registration certificate with the Ministry of Finance (MoF).
• Form 24 and Form 49.
• If the company is registered as an 'Sdn Bhd', a copy of the memorandum and articles of association is required.
• A detailed company profile.
• A valid business registration certificate.

Employees should also confirm with their employer if any additional documents are necessary for the VPF account setup.

VPF Tax Rules

• You can claim tax benefit up to ₹1.5 lakh under Section 80C.
• If your total annual EPF + VPF contribution is over ₹2.5 lakh, interest on excess becomes taxable.
• Withdrawals after 5 years of service are tax-free.
• If withdrawn before 5 years, tax may apply.

How to Start VPF Contribution?

It’s easy! You don’t need a new account. Just follow these steps:

• Write to your employer or HR department.
• Mention how much (or what % of your salary) you want to contribute.
• The amount will be automatically deducted each month and added to your EPF.

Usually, you can change the amount only at the start of the financial year.

Withdrawal Rules for VPF

You can take money out of your VPF account:

• At the time of retirement
• On resignation or job change
• For major expenses like:
  • Buying or building a house
  • Child’s education or wedding
  • Serious medical treatments

How to Withdraw Money from a VPF Account

If you need money for urgent needs like a medical emergency, you can withdraw from your VPF account by following these steps:

• Fill out Form-31.
• Write a simple request letter asking for the withdrawal.
• You can get Form-31 from your employer’s HR department or the government website.
• Submit all the required documents like:
  • Your PF number
  • Postal address
  • Bank details
  • A cancelled cheque
• Make sure all documents are self-attested (signed by you).

VPF vs PPF vs Fixed Deposit (FD)

Verdict: If you’re a salaried employee, VPF offers better returns and tax advantages than FDs or even PPF in many cases.

Why Choose VPF?

Choose VPF if you:

• Want to save more than the EPF limit.
• Are looking for safe, long-term returns.
• Want to reduce your taxable income.
• Don’t want to risk money in the stock market.

VPF Rules and Guidelines

Here are the main things to know about Voluntary Provident Fund (VPF):

• Unlike EPF, employees can choose to contribute up to 100% of their basic salary and dearness allowance to VPF.
• Contributing to a VPF account is completely optional.
• The Indian Government decides the interest rate for VPF at the beginning of every financial year. This rate can go up or down each year.
• When you retire or leave your job, you can withdraw the full amount saved in your VPF account. You can also transfer the VPF balance from your old job to your new one. If the account holder passes away, the nominee or legal heir will receive the full amount.
• Only employees who are part of the Employees’ Provident Fund Organisation (EPFO) and already have an EPF account can open a VPF account. Those working in the unorganised sector are not eligible.
• You can start a VPF account any time during the financial year. But once you start, you must keep investing in it for at least 5 years.
• You can take a partial withdrawal as a loan from your VPF account. However, if you withdraw money before it matures, the amount you take out will be taxed.

FAQs on VPF - Voluntary Provident Fund

• What is the current interest rate on VPF?
  The VPF currently earns an interest rate of 8.25% per year, set by the Indian Government at the start of each financial year.
• Who can invest in VPF?
  Only salaried employees who already have an EPF account under the Employees’ Provident Fund Organisation (EPFO) can invest in VPF.
• How much can I invest in VPF?
  There’s no minimum or maximum limit for contributions. You can invest up to 100% of your basic salary plus dearness allowance. Your employer doesn't contribute to VPF—only you do.
• Can I stop contributing to VPF mid-year?
  No, once you start contributing, you can’t stop in the middle of the financial year. In most companies, changes are allowed only at the beginning of a new financial year.
• What is the difference between EPF and VPF?
  EPF is mandatory: You contribute 12% of your basic salary and DA.
  VPF is optional: You can contribute up to 100% of your basic salary and DA.
• Can I take a loan or withdraw money from my VPF?
  Yes, you can make partial or full withdrawals. However, if you withdraw before 5 years, the withdrawn amount may be taxable.
• What happens to my VPF if I change jobs?
  Your VPF account is linked to your Aadhaar card, so it can be easily transferred to your new employer, as long as they are registered with EPFO.
• Who should consider opening a VPF account?
  VPF is great for those looking for safe, long-term savings, especially people who are close to retirement or want to build a solid pension fund.