The Voluntary Provident Fund (VPF) is a savings scheme that allows employees to contribute a percentage of their salary, over and above the mandatory Employee Provident Fund (EPF) contribution. This voluntary contribution is eligible for tax deductions and earns interest at the same rate as EPF.

Key Points about VPF

1. Contribution Limit:
               The employee can contribute up to 100% of their basic salary (including dearness allowance, if applicable) to the VPF.
2. Employer Contribution:
                The employer is not required to contribute to the VPF. Only the employee’s contribution is added to the fund.
3. Tax Deduction:
                The VPF contribution is eligible for tax deduction under Section 80C of the Income Tax Act, with the overall deduction limit being ₹1.5 lakh per annum.
4. Interest Rate:
                The interest rate for VPF is the same as EPF, which is currently around 8-8.5% per annum (as set by the Indian government).
5. Tax Treatment:
                The amount accumulated in the VPF is tax-free at the time of withdrawal, provided the employee has worked for at least 5 years in the organization.
6. Where VPF contribution will be reflected:
                Employees can view their VPF contributions and other related details on the EPFO portal using their UAN, which is same as their EPF number.
7. How to Apply:
                Send a formal email to Muskaan (muskaan@vandey.in) / Finance team requesting the percentage of contribution in the VPF.

Calculation of VPF

The VPF contribution is based on the employee’s basic salary (including dearness allowance, if applicable).

    Formula:
        VPF Contribution = (Employee’s Basic Salary + Dearness Allowance) × Employee’s Contribution Percentage
    Example:
        Let’s consider an example to understand the calculation:
         1. Basic Salary: ₹50,000 Dearness Allowance: ₹10,000 Total Salary Base: ₹60,000
         2. Employee Contribution: 50%

      VPF Contribution = ₹60,000 × 50% = ₹30,000
      However, there is also a mandatory Employee Provident Fund (EPF) contribution that must be subtracted.
      Assuming the EPF contribution is ₹1,800 per month, the VPF contribution will be:
      VPF Contribution = ₹30,000 – ₹1,800 = ₹29,100 per month
      So, in this case, ₹29,100 would be contributed to your VPF every month.

Other Factors to Consider

1. Interest on VPF:
            The VPF balance will earn interest at the same rate as the EPF, which is reviewed and updated annually by the government. The interest is credited to the VPF balance.
2. Tax Treatment Contributions:

           The employee’s VPF contributions are eligible for tax deduction under Section 80C of the Income Tax Act, subject to a maximum limit of ₹1.5 lakh per annum.
3. Interest:

           The VPF balance earns interest at the same rate as the EPF, which is reviewed and updated annually by the government. This interest is then credited directly to your VPF account (credentials same as EPF account).

4. Withdrawal:

            The accumulated amount in the VPF is tax-free at the time of withdrawal, provided the withdrawal is done after 5 years of contribution. Any withdrawal before the span of 5 years will be taxable (as set by the Indian government at the time of withdrawal).

           Summary:
          The Voluntary Provident Fund (VPF) is a great option for employees looking to boost their retirement savings and enjoy tax deductions. Employees can contribute up to 100% of their basic salary, including any dearness allowance, and these contributions are tax-deductible under Section 80C, with a ₹1.5 lakh annual limit. The VPF earns competitive interest rates, similar to the EPF. To withdraw tax-free, employees must keep their funds in the VPF for at least 5 years. Understanding VPF can greatly enhance employees’ savings and financial planning.