Voluntary Provident Fund (VPF) is an optional retirement savings scheme where salaried employees can contribute more than the mandatory Employee Provident Fund (EPF) contribution to build a larger retirement corpus.
Voluntary Provident Fund (VPF) is an extension of the Employee Provident Fund (EPF). While EPF requires employees to contribute 12% of their basic salary and dearness allowance, VPF allows them to voluntarily contribute a higher percentage (up to 100% of basic salary and DA).
The VPF contribution earns the same interest rate as EPF, which is declared annually by the government. It is considered a safe and stable long-term investment option because it is backed by government regulations.
One of the biggest advantages of VPF is its tax benefits under Section 80C of the Income Tax Act, subject to prescribed limits. The interest earned and maturity amount are also tax-free if withdrawal conditions are met.
VPF is ideal for salaried individuals who want disciplined, low-risk retirement savings without exposure to market volatility.
"An employee earning ₹40,000 as basic salary contributes 12% (₹4,800) to EPF. If they choose to contribute an additional 8% (₹3,200) voluntarily, that extra amount is considered VPF."