The voluntary Provident Fund (VPF) is a long-term investment scheme that is available to employees in India. It is a type of savings scheme that allows individuals to voluntarily save a portion of their income for their retirement years. VPF is a subsidiary of the Employee Provident Fund (EPF), which is a mandatory savings scheme for employees in India.
Who can invest in Voluntary Provident Fund?
The voluntary Provident Fund (VPF) is open to all salaried individuals who are members of the Employee Provident Fund (EPF). This includes both private-sector and public-sector employees who are covered under the EPF scheme. In order to participate in VPF, employees must make a voluntary contribution to their EPF account, over and above the mandatory contribution required under the EPF scheme.
Benefits of Voluntary Provident Fund
- Tax benefits: Contributions made to VPF are eligible for tax deductions under Section 80C of the Income Tax Act.
- Guaranteed returns: VPF is a guaranteed return investment, which means that the returns are fixed and guaranteed by the government.
- Long-term savings: VPF is a long-term investment, which means that it is ideal for individuals who are saving for their retirement years.
- Safety: VPF is a highly secure investment, as it is backed by the government of India.
- Flexibility: VPF allows individuals to voluntarily choose how much they would like to contribute to their EPF account, making it a flexible investment option.
Tax benefits available under a VPF
Under Section 80C of the Income Tax Act, contributions made to a VPF are eligible for tax deductions up to a limit of 1.5 Lakhs in a financial year. This means that an individual’s taxable income is reduced by the amount they contribute to their VPF, thus lowering their tax liability.
In addition to this, the interest earned on VPF contributions is exempt from tax, making it an attractive option for individuals looking to save for their retirement while also reducing their tax burden. The maturity amount received at the end of the VPF term is also tax-free, providing a significant advantage over other savings instruments.
Withdrawal facilities
VPF can be withdrawn only after a specified period of time, typically 5 years from the date of investment. In certain circumstances, such as retirement, resignation, or death, VPF can be withdrawn prior to the specified period. Upon withdrawal, the individual will receive the accumulated corpus, along with the interest earned on the investment.
Conclusion:
In conclusion, VPF is a valuable investment option for salaried individuals who are looking to save for their retirement years. With its tax benefits, guaranteed returns, long-term savings potential, safety, and flexibility, VPF is an attractive option for individuals who are looking to secure their financial future. By making a voluntary contribution to their EPF account, individuals can take advantage of the benefits offered by VPF and ensure a secure and comfortable retirement.
