Voluntary Provident Fund

The benefits of VPF are available to the salaried individuals and are in line and extension of those of the Employees Provident Fund. The details of the benefits available are mentioned here.

• Investing in the Voluntary Provident Fund is a very simple process. Subscribers can simply invest in the VPF through the online mode or through the account section of the subscriber’s office.
• The subscribers need not worry about the continuation of the VPF upon changing their jobs as it is easily transferable using a single UAN (Universal Account Number) of the EPFO.
• The investment in the VPF is a safer option as compared to many other investment options available in the market. Also this scheme is managed by the Government of India and is thus assured in terms of safety and viability.
• The employee’s contribution in the VPF is eligible for a deduction under section 80C of the Income Tax Act, 1961. Also the amount of interest received is not taxable and the base interest rate has to be a maximum of 9.50%.
• The subscribers are eligible to get a tax benefit on the entire amount invested but if the amount is withdrawn from the account before the completion of the minimum lock-in period of 5 years then the entire account is taxable.
• The investment in VPF provides better returns as compared to those in PPF.

Rate of Interest

• The rate of interest on the Voluntary Provident Fund is decided by the Government of India and is the same as the rate of interest on the Employee Provident Fund.
• The current rate of interest of EPF for the financial year 2019-20 is 8.65%.

Withdrawal Details

• The subscribers are given the benefit of partial withdrawal under the Voluntary Provident Fund Scheme.
• The minimum lock-in period under the scheme is 5 years in order to avail the benefit of partial withdrawal.
• The subscribers can, however, withdraw the funds from the account any time in case of any emergency.
• The scheme provides the subscribers with the entire amount that can be received up on maturity if the subscriber resigns or retires.
• In the event of the death of the subscriber, the nominee of the subscriber received the entire accumulated amount under the VPF account.
• Subscribers can access withdrawals from this scheme whenever necessary by submitting a duly filled and signed application form in this regard, FORM 31 which can be available from the HR/Payroll team of the organization or by downloading the same from the website of the EPFO.
• The relevant documents needed have to be duly attested and  submitted along with such application and it has to include all the necessary information pertaining to the employee’s personal information, bank details, EPF account number, etc
• The employee must also provide a cancelled cheque among the list of documents to be submitted.

VPF Registration Procedure

There is no specific registration form available for the potential subscribers to enroll with the VPF. The subscribers who wish to be part of the VPF have to inform the same to the HR/payroll department of their organization and they will convert the EPF account of the subscriber to the VPF account.

The employees have to fill out and sign the required KYC form and submit the same to the HR/Payroll Department of the organization.

The department up on receiving such form will verify and confirm the details of the subscriber submitted and change the basic EPF account to a VPF one.

Post this conversion, the contribution of the employee as decided and informed by him/her to the HR/Payroll Department will be deducted from their salary as a contribution of the employee to the VPF account.

Other details of the VPF

The option to open a VPF account is available only to the salaried employees of any organization that is registered with the EPFO. The employees/self employed individuals of the unorganized sector are not eligible to open a VPF account as per the rules of the scheme.

The contribution under the VPF can be extended up to a maximum of 100% of the basic salary and DA unlike the contribution under EPF where the maximum contribution is restricted up to 12% of the basic salary.

The rate of interest of the VPF account is determined by the Government of India at the beginning of the Financial/Fiscal year. The rate of interest of the VPF is the same as that of the EPF and can be incremental/decremental/same as compared to that of the previous years.

The contribution of the employer to the VPF is not mandatory as in the case of EPF.

The minimum mandatory investment in the account has to be of 5 years and any withdrawal prior to this lock-in period or the maturity period is taxable at the hands of the subscriber. Subscribers can avail easy loans, though, against their VPF account.

FAQs