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Provident Fund

VPF Calculator 2023 – Voluntary Provident Fund, Interest Rate, & Benefits

The Voluntary Provident Fund (VPF) is an excellent alternative if you're seeking a long-term investment strategy with good returns and low risk. Refer to the below-provided article to learn more about the VPF calculator and VPF benefits.

Since VPF contributions are eligible for a tax deduction, they can help reduce your taxable income and increase your take-home pay. VPF is a good way to boost your retirement savings and reduce your tax liability at the same time.

What is VPF?

A Voluntary Provident Fund (VPF) is a long-term investment option available to salaried individuals in India. It allows employees to save additional funds over and above their mandatory Provident Fund (PF) contribution. VPF contributions are eligible for tax deduction under Section 80C of the Income Tax Act. VPF is a good investment option for those looking to save for retirement or other long-term goals. The interest rate on VPF deposits is decided by the government and is usually higher than the rate offered on PF deposits. VPF deposits also enjoy greater security as they are backed by the government.

VPF Full form

It is really imperative to understand what VPF stands for ‘Voluntary Provident Fund’. These funds are eligible for a tax deduction.

What are the Voluntary Provident Fund and VPF calculators?

The employee’s voluntary payment to his provident fund account is known as the Voluntary Provident Fund (VPF), sometimes known as the Voluntary Retirement Fund. This contribution exceeds the 12% required contribution to his EPF. More than 100% of his/her basic salary and dearness allowance may be contributed. The same percentage is used to calculate the interest of VPF Benefits.

Employers are not required to make investments in their employees’ VPF portfolios. An employee is also not required to make contributions to the Plan. Once payment is selected in the VPF, it cannot be changed or withdrawn before the initial 5-year base period has passed. At the beginning of each fiscal year, the Government of India sets the interest rate for the Voluntary Retirement Plan. The opening balance of each month is used to calculate interest for a voluntary provident fund every month. The employee and employer contributions to the EPF as well as the VPF calculator online are included in this initial balance.

While interest is calculated each month, it is only credited to an EPF account after the fiscal year.

People should be aware that the VPF interest rate for the initial month is zero because there is no opening balance. Whatever the case, to calculate interest every month, the Voluntary Provident Fund interest rate is divided by 1200, and the result is multiplied by the initial balance of the month.

Your trusted partner in PF compliance. Click to know about PF Registration Process.

Voluntary Provident Fund Benefits

The VPF is a fantastic tax-saving alternative because it falls under the EEE classification (exempt on contribution, exempt from the principal, and exempt on interest). Additionally, it assists the employee in building a sizable savings portfolio and supports him through significant life stages. The following are some of the key advantages of a VPF account:

  • Investment option that is risk-free: Because the Indian government runs the scheme, there are no dangers associated with doing so. It is quite safe to invest in a VPF account compared to other long-term investing options provided by a commercial organisations.
  • High-interest rate: The rate of interest under the VPF plan is 8.1% per annum. Taxes are not applied to the interest that is produced as a result of the contributions
  • The application process is simple. A VPF account can be opened in a matter of steps. By submitting the registration form, employees can get in touch with their employer’s finance department and ask them to start a VPF account. The VPF account will also function as the existing EPF account does
  • Simple transfer procedure: Employees can easily move their VPF accounts from their previous employer to their new employer if they switch jobs.

Voluntary Provident Fund Guidelines and Rules

The following is a list of the VPF account’s rules and guidelines;

  • Employees are permitted to contribute 100% of their basic pay and dearness allowance to a Voluntary Provident Fund plan, as opposed to 50% to an EPF account Login https://unifiedportal-mem.epfindia.gov.in/
  • Employees are not required to make contributions to their VPF accounts
  • At the beginning of the fiscal year, the Indian government chooses the interest rate for a Voluntary Provident Fund account. In comparison to prior years, the rate could go up or down
  • Upon the time of resignation or retirement, the full amount that will be available at maturity may be withdrawn. People may also shift their VPF balance from their old workplace to their new one
  •  The total money collected in the account will be given to the legal successor or nominee if the account owner dies
  • To open a Voluntary Provident Fund account, a person must be employed by an organization that is a member of the Employees’ Provident Fund Organisation (EPFO) and have an EPF account. Unorganized sector employees are not permitted to create a Voluntary Provident Fund account
  • A Voluntary Provident Fund account may be opened by an individual at any moment during the fiscal year. For a five-year period, contributions to the account cannot be discontinued
  • Loans can be taken out against the Voluntary Provident Fund account in order to make partial withdrawals. If the money is taken out before the maturity period, the money taken out is taxed.

Use Vakilsearch’s EPF calculator to find out how much money you have left in your EPF account before you retire.

How to Take Money Out of a Voluntary Provident Fund Account?

Withdrawing funds from a Voluntary Provident Fund account could be helpful in the event of financial needs resulting from medical problems. Employees who wish to withdraw their Voluntary Provident Fund must submit Form-31 along with a written request. Employees will be able to obtain Form-31 via the Human Resources (HR) department at their business or online through the government portal. All necessary paperwork must be submitted, along with the employee’s information, such as their PF number, mailing address, and bank information. Additionally, a voided check needs to be presented. All documents must be self-attested. Employees are permitted to withdraw money from the Voluntary Provident Fund account in the event of any unanticipated financial emergencies. Following are some of the causes for which the Voluntary Provident Fund may withdraw:

  • If the account holder or his or her children need to pay for medical expenditures
  • For the account holder’s wedding or further study
  • For the purchase of new property, the building of a home, or both

Tax Advantages Provided by a Voluntary Provident Fund

The Voluntary Provident Fund account is one of the greatest possibilities for investing in India among the many investment options. Employees may receive tax benefits of up to ₹1.5 lakh under Section 80C of the Income Tax Act of 1961. These payments also generate interest, which is tax-free. The money will, however, be taxable if the interest rate exceeds 9.50% p.a.

Conclusion 

Voluntary Provident Fund is a great way to save for retirement. It offers many benefits, including tax breaks and the ability to invest in a variety of funds. If you are looking for a retirement savings option, consider a Voluntary Provident Fund.

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