What is the Voluntary Provident Fund (VPF)?


6 min read

The voluntary contribution made by employees towards their Provident Fund (PF) account is called Voluntary Provident Fund (VPF). Read all you need to know about VPF in this post.

Securing one’s family financially to tackle any unforeseen future events is important. So, to secure your own future as well as the future of your dependents, you must save enough in various saving instruments. However, before doing so, you should get details about such saving tools so that you can gain better benefits out of them. You must note that different plans of savings function in different ways and benefit differently. Thus, you need to be very careful while choosing between the best fund to invest on for securing your future.

One such best option is the voluntary provident fund or VPF, which is considered to be a wise investment to accomplish future goals. This plan is safe and allows high protection from unforeseen issues. Let us understand the term in detail.

What is a Voluntary Provident Fund or VPF?

It is the voluntary contribution made by an employee towards his/her Provident Fund (PF) account. This contribution is done in addition to the minimum amount of payment fixed by the EPFO or Employees’ Provident Fund Organization. So, the account holder can make the VPF contribution as an additional security to accumulate savings.

Since Voluntary provident fund or VPF is an addition to the EPF or Employees’ Provident Fund, it allows the employee to add as much as they want to their PF account.  The voluntary provident fund scheme is supervised by the government of India. However, 12% of the money is contributed towards the EPF account.

The VPF is a beneficial tool to save money, evaluating the interest rate of the fund before starting a plan is still advisable. The VPF also allows the policyholder to focus on your future monetary planning to help you gain further advantages.

Features of Voluntary Provident Fund(VPF)

Below are some of the best and most attractive features of VPF:

  1. It keeps your investment secure – Since the VPF account is a secure investment scheme, it doesn’t involve risks like in other investment instruments. Further, it supports the insured to improve their financial conditions so that they can overcome future problems.
  2. It offers High Rate of Interest –  The best part about VPF is that it offers a high rate of interest, thereby allowing the account holder to create greater wealth. The interest rates of VPF are fixed by the government of India considering inflation and many other factors. Currently, VPF interest rate per annum is at 8.5%.
  3. It makes transferring of funds easy – VPF accounts can be transferred easily from one company to another at the time of job change. The process of account transfer is easy and time saving.
  4. It is easy to apply for a VPF account – It is very simple to apply for a VPF account. All you need is to go to the HR manager of your organization and request him/her to open your VPF account. You have to offer the required KYC documents for verification.
  5. It allows Tax Benefits –  The VPF account allows tax exemption and thus helps individuals to save large taxable amounts.
  6. It allows partial withdrawals – A VPF fund allows the account holder to withdraw amounts as a whole as well as partially as per your requirement. However, if any amount is withdrawn before the completion of 5 years of the fund, a tax might be levied on it. Thus, it is advised to know and understand the withdrawal rules of VPF in detail.
  7. It allows loan facilities – Moreover, you are also allowed to avail loan facilities from your VPF account in times of emergency and as per the voluntary provident fund rules and regulations.
  8. It offers Death Benefit – If the account holder dies suddenly, the accumulated amount is paid to the nominee or legal heir of the person in full.

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Key Benefits of the Voluntary Provident Fund

Let’s check the key benefits of VPF as stated below:

  • The VPF account is available with a lock in period of 5 years, which is ideal for long-term investments
  • The account allow individuals to yield good returns because of its high rate of interest
  • The account allows individuals to withdraw money while resigning from a job or after retirement.
  • It offers tax benefits of up to INR 1 lakh
  • VPF account is easy to open at any time the year

How Can I Enroll in a VPF Account?

VPF is a division of the EPF or Employee provident fund. Hence, a VPF account is easy to open. You just need to request the concerned finance or HR team of your company.

However, to be able to open a VPF account as an employee, it is important that your employer or the company is registered with the Employee Provident Fund office. Also, the employee has to submit a VPF application form to the employer whom you are working with and submit the necessary KYC documents as well.

How to Calculate the VPF Interest Rates?

The VPF interest rates are attributed to your EPF account towards the end of a fiscal year. The rate of interest in this case is calculated as per the balance available at the start of a month. This balance includes the contribution done by the employee, employer and the VPF amount.

By using an online tool of VPF calculator, one can calculate the interest rates of your VPF account. With this calculator, you can calculate the accumulated amount of EPF that you will receive after retirement as well as can calculate the lump sum payout (including both employee and employer contribution). Further, you can also know the accrued interest on the Voluntary Provident Fund by submitting the required details in the calculator.

Documents Required for VPF Money Withdrawal

Below are the documents needed for VPF withdrawal:

  • Form-31
  • One cancelled cheque
  • Bank details (where the amount will be credited)
  • Personal details of the individual holding the VPF account
  • Account number of EPF, and
  • Your postal address

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VPF Rules and Regulations 

It is important to know the rules and regulations of the VPF in detail if you are willing to open an account:

  • Note that the rate of interest in VPF varies and can go up and down in a fiscal year
  • To create VPF account, one requires an EPF account
  • VPF allow partial withdrawals as loans

To Sum Up

Knowing all about the voluntary provident fund contribution is important before opening an VPF account. This supports individuals with a lot of future plans and eases financial worries. Further, VPF makes it easy for withdrawing or transferring the amount to give you a hassle-free experience.

Read More:

EPF vs VPF vs PPF: Which one is better?

What is an Annuity? What are its Benefits and Different Types of Annuities?

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Oct 17, 2022
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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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