Here’s What You Must Know About Voluntary Provident Fund (VPF)

VPF or Voluntary Provident Fund is often considered a retirement fund in which every month, a contribution is made by the employee towards the provident fund account. Employees have the option to make voluntary contributions toward the EPF account.

The contribution towards VPF does not include the mandatory 12% basic + DA (dearness allowance) contribution that a salaried employee makes into the EPF account on a monthly basis. Under current VPF rules, EPF subscribers can contribute up to 100% of their basic salary and DA as VPF contribution, however, the employer does not have to match it. The interest rate offered on the Voluntary provident fund scheme is the same as that offered on the EPF scheme.

VPF has been one of the preferred long-term investments among salaried employees who are seeking guaranteed returns with minimal risk to their investment. This has made it a popular retirement tool among many EPF subscribers Some of the key features and benefits of availing voluntary provident fund are as follows:

Since VPF investments are made into your existing EPF account, being a current subscriber to the Employees Provident Fund (EPF) is mandatory to apply for VPF. So, if you are a salaried person receiving payments on a monthly basis in your salary account, then only you are eligible to open a VPF account as it is an extension to your regular EPF account.

At present, you can only opt for a VPF account via the offline route and through your current employer. All you need to do is submit a letter to your organization’s accounts team or HR team requesting them to contribute to your VPF account. Along with the letter, you would also need to submit a registration form to open a VPF account. In the registration form, you would need to mention the amount you want to contribute every month towards the account.

The list of documents to be submitted in order to open and start contributing to a VPF account are as follows:

• A registration certificate from the Ministry of Finance needs to be submitted since only companies registered under employee provident fund organizations are allowed to open a VPF account.
• Completely filled out Form 24 and Form 49 are to be submitted
• The employer should also submit their company profile in detail.
• A business registration certificate will also be required to be submitted.

Interest on a VPF account is the same as what you earn on your EPF investments. The current interest offered on a VPF account is 8.1%, which is more than that of other guaranteed return investments like a FD and PPF account. However, the government of India has the authority to change the interest rate offered on the VPF account. Below are the historic VPF interest rates from FY 2012 to 2022:

The Voluntary Provident Fund scheme has gained huge popularity among investors looking to invest in low-risk investment schemes with decent returns. Also, you have the option to make partial withdrawals in the case financial emergency. Some of the common scenarios in which an investor can withdraw money from the VPF account are:

• For medical emergencies like the treatment of self/family members
• To fund child’s higher education.
• For purchasing a self-occupied residential property,
• To pay off an existing home loan.