VPF calculators and Voluntary Provident Funds: what are they?
The Voluntary Provident Fund (VPF), sometimes called the Voluntary Retirement Fund, is the employee’s voluntary contribution to his provident fund account. Contributions to his EPF exceed the required 12%. A person may contribute more than 100% of his/her basic salary and dearness allowance. Interest on VPF benefits is calculated using the same percentage.
Employees’ VPF portfolios are not required to be invested by their employers. The Plan is not subject to employee contributions. During the initial five-year base period, once payments are selected in the VPF, no changes can be made or withdrawals can be made. The Voluntary Retirement Plan interest rate is set by the Government of India at the beginning of each fiscal year. Every month, interest is calculated on the opening balance of a voluntary provident fund. This initial balance includes both employee and employer contributions to the EPF.
After the fiscal year ends, interest is only credited to an EPF account.
Since there is no opening balance, the VPF interest for the first month is zero. Regardless of the circumstances, the Voluntary Provident Fund interest rate is multiplied by 1200 to calculate interest every month.
Benefits from Voluntary Provident Funds
* The VPF is an excellent tax-saving alternative since it falls under the EEE classification (exempt from contribution, principal, and interest). Additionally, it supports the employee through significant life stages and assists him in accumulating a substantial savings portfolio. A VPF account offers the following advantages:
* It is a risk-free investment option since it is run by the Indian government. As compared to other long-term investing options provided by commercial organizations, VPF accounts are quite safe.
* The VPF plan has an interest rate of 8.1% per year. As a result of contributions, interest is not taxed
* There is no complicated application process. It is easy to open a VPF account. Employees can start a VPF account by submitting the provident fund registration form to their employer’s finance department. As with the existing EPF account, the VPF account will also function as one
* In the event that an employee switches jobs, they can easily transfer their VPF accounts from their previous employer to their new employer.
VPF Money Withdrawal
The withdrawal of funds from a VPF account could be helpful in the event of financial need due to medical problems. A written request along with Form-31 must be submitted by employees who wish to withdraw their VPF. The Form-31 can be obtained by employees through the Human Resources (HR) department at their workplace or online through the government portal. PF numbers, mailing addresses, and bank account information, as well as all necessary paperwork, must be submitted. Voided checks must also be presented. Self-attestation is required for all documents. In the event of an unanticipated financial emergency, employees can withdraw money from the VPF account. The VPF may withdraw for the following reasons:
* In the event that the account holder or any of his or her children needs to pay for medical expenses
* A wedding or further education of the account holder
* Whether you are buying a new property, building a home, or both
VPF Tax Advantages
Among the many investment options available in India, the VPF account is one of the best. In accordance with Section 80C of the Income Tax Act of 1961, employees may receive tax benefits up to a maximum of 1.5 lakh. Tax-free interest is also generated by these payments. If the interest rate exceeds 9.50% per annum, the money will be taxable.
Voluntary provident funds (VPFs) can also be referred to as voluntary retirement funds. A voluntary contribution to a PF account is the employee’s choice. Contributions must be at least 14%. Contributions over 100% of basic pay plus dearness allowance are the highest. A similar rate to that of the EPF also applies to the interest rate. Employees’ voluntary provident funds are not subject to employer contributions unlike Employees’ Provident Fund Schemes. In addition, employees are not required to contribute to this plan.