At present, any interest earned above Rs 2.5 lakh comes under tax. The objective of this initiative is to encourage low-middle and middle-income individuals to increase their savings through EPFO. This will help in raising more funds for retirement.

As per a report in Economic Times, published in Business Today, sources familiar with the matter have indicated that the Labour Ministry is currently reviewing the proposal and may discuss it with the Finance Ministry during the budget deliberations for FY26.

What is Voluntary Provident Fund?

VPF is an optional investment made by salaried employees in addition to the mandatory EPF. It can be defined as an extension of EPF that allows employees to increase their retirement savings and earn the same rate of interest as their original PF deposits. Like EPF, contributions to VPF also grow as per compound interest, as returns are released on an annual basis. It also comes under EPFO.

It is important for VPF customers to know that any withdrawal made before completing the minimum period of five years may be subject to taxation. Like EPF, VPF funds are given to the nominee on retirement, resignation or in the unfortunate event of death of the account holder.

Higher contribution gives the same interest as EPF.

Another specialty of VPF is that it is a government run scheme, in which risk is low and returns are high. The contribution made in this is more than the 12 percent contribution made by an employee in his EPFO ​​account. The maximum contribution is up to 100 percent of the basic salary and dearness allowance. Under this scheme, interest is given at the same rate as EPF.

The limit of Rs 2.5 lakh on tax-free

voluntary contributions was introduced in the FY22 budget to prevent high-income employees from using the facility to earn more tax-free interest than the interest offered by banks or fixed deposits. The move was for high-income employees who were using this facility to earn more tax-free interest than the interest offered by banks or fixed deposits.

20 lakh crore funds under EPFO

​​EPFO ​​has an average of 70 million monthly contributors, over 7.5 million pensioners and a fund of over Rs 20 lakh crore. EPFO ​​allows employees to contribute more by opting for Voluntary Provident Fund (VPF). An employee can request his employer to deduct more than the mandatory 12% contribution. The maximum contribution to VPF can be up to 100% of the basic salary and dearness allowance, with the same rate of interest as the basic contribution.

Generally, VPF falls under the exempt-exempt-exempt tax category. This means that contributions, interest and maturity proceeds are all tax-free. EPF contributions up to Rs 1.5 lakh per financial year are eligible for tax deduction under Section 80C of the old tax regime. Employees can contribute up to Rs 2.5 lakh annually to VPF without facing additional taxes. Withdrawals and maturity proceeds from the provident fund are also exempt from taxes.

VPF Interest Rates

EPFO ​​has been offering an interest rate of over 8% since FY78, reaching a peak of 12% in FY90 and maintaining that level for 11 years till FY00. The interest rate on PF savings was 8.10% for FY22, 8.15% for FY23 and 8.25% for FY24.

Saving in EPF and VPF

By investing Rs 20,833 per month in EPFO ​​and VPF, you will accumulate Rs 2.5 lakh per year. At an annual interest rate of 8.25%, you can accumulate about Rs 3.3 crore in a period of 30 years.

Related Articles:-

Traffic Challan: Govt plans system for smart payments of vehicle challans – Know the details

ITR Filing Deadline Extended: Deadline for filing ITR has been extended for these taxpayers, check new date here

School Closed on Diwali! Schools will be closed in these states for only 1 day, Check details

The post Big News EPFO ​​members…! Govt may increase the limit of VPF tax free interest, know the details first appeared on Rightsofemployees.com.

But through Voluntary Provident Fund (VPF), you can also increase your contribution in EPF and can avail the same interest on your investment which you get on EPF. At present, interest is being given on VPF at the rate of 08.15 percent. Know all the important information related to VPF.

How much money can be deposited in VPF

Any EPFO member can avail the facility of contribution in VPF and increase his contribution in the provident fund. There is no limit for salary deduction in VPF. If the employee wishes, he can also contribute up to 100 percent of the basic salary. The method of investing in VPF is exactly the same as that of depositing money in EPF, that is, if you start investing money in VPF, then its money will also be automatically deducted from your salary every month, like EPF is deducted.

How to start investing

If you are also interested in investing in VPF, then you will have to meet the HR of your company and tell him that you want to increase your investment in PF. With the help of HR, you can open your VPF account along with EPF. You will have to fill a form and submit it to HR regarding how much contribution you want to increase in your salary. After this the process of linking your VPF account with EPF account will be completed. After this process is completed, you can start deducting money from your salary in VPF. Once you opt for VPF, it is mandatory to deposit money in it for at least 5 years.

What are the rules for withdrawal of funds?

The interest and benefits received on VPF amount are the same as in EPF, similarly the rules for withdrawal of money are also the same as in EPF. You can withdraw the entire amount of VPF fund only after retirement. After 5 years, when its lock-in period ends, you can withdraw partial amount from it. Claim for this can be made online.

Tax exemption and account transfer

If you change your job, PF account can also be transferred like EPF. On investing in VPF, there is no tax to be paid on its interest and withdrawal amount. Therefore it is considered as Exempt-Exempt-Exempt (E-E-E) category investment. In this, one gets the benefit of tax exemption under Section 80C of the Income Tax Act. In this fund, you can claim tax exemption up to Rs 1.50 lakh in a financial year.

The post EPF contribution: Want to take benefit of high interest rates of EPF by increasing contribution first appeared on Rightsofemployees.com.

Employees working in an organized sector deposit a fixed amount of their salary in EPF. This is a kind of investment. In this, the benefit of interest is given by the government. After the employee’s retirement, he can use the amount of this fund. Along with the employee, the employer also contributes to this fund.

In the current financial year 2023-24, the interest rate in this fund has been fixed at 8.15 percent. Do you know that in EPFO, employees also get the benefit of Voluntary Provident Fund (VPF). This is also a very good option for investment. Your investment in Voluntary Provident Fund remains safe and you also get high returns. Therefore Voluntary Provident Fund is a profitable deal. Come, let us know what are the benefits of Voluntary Provident Fund?

Benefits of Voluntary Provident Fund

In this fund you are given interest by the government. If you increase your contribution in PF account then you get interest rate of 8.15 percent. In this you get the benefit of more interest than FD.

There is no limit on investing in Voluntary Provident Fund. You have to invest in VPF for at least 5 years.

The lock in period of Voluntary Provident Fund is 5 years. If you withdraw money from this fund after 5 years, you do not have to pay any tax. This means that you also get the benefit of tax benefits in this. Apart from this, you can claim tax exemption up to Rs 1.50 lakh under 80C of the Income Tax Act 1961.

How to invest in Voluntary Provident Fund

If you want to invest in VPF , you will have to inform your company about it. After this you will have to increase your PF amount. With the help of company’s HR, you can open VPF account along with EPF account. After opening the VPF account, money will start being deducted from your salary.

The post Voluntary Provident Fund is a profitable deal, know why you should invest in it first appeared on Rightsofemployees.com.