VPF Rules and Regulations

The Voluntary Provident Fund (VPF) is a retirement savings scheme that allows you, the employee, to contribute extra money beyond the mandatory Employee Provident Fund (EPF) contribution. These additional contributions come with tax benefits and a healthy interest rate, making VPF a valuable tool for long-term financial planning.

There are certain VPF rules and regulations in place to get the most out of the savings scheme. These rules will tell you how much you can contribute, when you can withdraw funds, and the tax implications. They are in place to protect your savings, promote long-term saving, and ensure fair practices for everyone using VPF.

Table of Contents:

• ⇾ VPF Rules and Regulations
• ⇾ Basic VPF Rules
• ⇾ Rules of Voluntary Provident Fund
• ⇾ Rules Regarding Contributions of VPF
• ⇾ Rules Regarding Tax Benefits of VPF
• ⇾ Rules Regarding Lock-in Period of VPF
• ⇾ Rules Regarding Interest Rate of VPF
• ⇾ Rules Regarding Withdrawals of VPF
• ⇾ Steps To Enroll In VPF
• ⇾ Ways To Invest In Voluntary Provident Funds
• ⇾ Contribution Amount
• ⇾ Salary Deduction
• ⇾ VPF Rules And Guidelines on Taxation

Basic VPF Rules

The Voluntary Provident Fund (VPF) offers salaried individuals a way to boost their retirement savings beyond the mandatory Employee Provident Fund (EPF) contributions.

The few basic rules of Voluntary Provident Fund include:

• Eligibility: Only salaried individuals with an existing EPF account can participate in VPF.
• Contributions: You can contribute any amount you choose, up to 100% of your basic salary and dearness allowance (DA).
• Tax Benefits: Contributions made towards VPF qualify for tax deduction under Section 80C of the Income Tax Act.
• Lock-in Period: Your contributions are locked in for five years.
• Interest Rate: The interest rate on VPF is the same as the EPF rate (current rate to be updated later).
• Withdrawals: After the five-year lock-in period, you can withdraw your VPF contributions and interest earned completely tax-free.

Besides, you can also compare PPF & VPF to make the right choice.

Rules of Voluntary Provident Fund

The voluntary Provident Fund (VPF) is an optional extension of the Employees' Provident Fund (EPF) scheme in India, designed to provide employees with a means to increase their retirement savings. Before investing in VPF, you should know about the primary rules of the Voluntary Provident Fund in India.

Rules Regarding Contributions of VPF

• You can contribute any amount you choose, up to 100% of your basic salary and dearness allowance (DA).
• There is no minimum contribution requirement.
• Your employer doesn't contribute to your VPF account.

Rules Regarding Tax Benefits of VPF

• Contributions made towards VPF qualify for tax deduction under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh per year. This will reduce your taxable income.

Rules Regarding Lock-in Period of VPF

• Your contributions are locked in for five years from the date of your first contribution.
• Withdrawals before five years are generally not allowed.
• If a withdrawal is made before five years, it may be subject to taxes.

Rules Regarding Interest Rate of VPF

• The current interest rate of the Voluntary Provident Fund (as of June 24, 2024) is around 8.15%.

Rules Regarding Withdrawals of VPF

• After the five-year lock-in period, you can withdraw your VPF contributions and interest earned completely tax-free.
• Partial withdrawals for specific reasons may be allowed before five years with certain conditions. These reasons typically include:
• Medical emergencies
• Higher education expenses (yours or your children's)
• House purchase

You can check out more on VPF withdrawal Rules from the linked page.

Steps to Enroll In VPF

Enrolling in the Voluntary Provident Fund (VPF) is a strategic financial decision that can significantly enhance an employee's retirement savings. VPF enrollment is typically facilitated through an employee's organization.

Here are the steps one should take to enroll in the Voluntary Provident Fund.

• Step 1: Contact Your HR Department. Since VPF contributions are deducted from your salary, you'll need to initiate the process with your company's HR department.
• Step 2: Request VPF Enrollment. Inform your HR that you'd like to start contributing to VPF and request the necessary enrollment form.
• Step 3: Complete the Enrollment Form. The form will likely ask for your personal details, desired VPF contribution amount (as a percentage of your basic salary and DA, up to 100%), and your EPF account details.
• Step 4: Once completed, return the form to your HR department for processing.

Ways to Invest in Voluntary Provident Funds

VPF doesn't require separate account creation or management, making it a convenient choice for many. There are ways to manage how you contribute to maximize your VPF benefits.

VPF Contribution Amount

• You control how much extra you contribute to your EPF on top of the mandatory contribution.
• You can instruct your HR to increase or decrease this amount throughout the year.
• Some employers might have internal deadlines for submitting these changes.

Salary Deduction towards VPF

• You can instruct your HR to deduct your desired VPF contribution directly from your salary.
• This automates contributions and ensures consistent savings.

VPF Rules & Guidelines on Taxation

The Voluntary Provident Fund (VPF) offers significant tax benefits for retirement savings in India. Here are the important rules and guidelines regarding the taxation of VPF.

Exempt Exempt Exempt ( EEE category)

VPF falls under the EEE category, meaning contributions, interest earned, and maturity amount are all exempt from taxes under specific conditions.

• Contributions: Deductible under Section 80C of the Income Tax Act, with a maximum deduction of Rs. 1.5 lakh per year. This reduces your taxable income.
• Interest: Earned interest is tax-free. From Financial Year 2021-22, interest on contributions up to Rs. 2.5 lakh is exempt. Interest on any amount exceeding this limit is taxable.
• Maturity Amount: If you withdraw the VPF amount after five years of continuous service, the entire maturity amount, including principal and interest, is tax-free.

Besides VPF, you can also check and invest in other saving schemes with better returns. Check the table below with links for details: