Voluntary Provident Fund (VPF)
VPF is a form of regular provident fund scheme under which a depositor can voluntarily maintain a clear portion of its provident fund. As shown by the name of this scheme, any employee who wants to take advantage of the VPF scheme deserves a contribution of earning / salaries for the traditional provident fund. This contribution should ideally be more than 12% of the PF limit; However, he is not obliged to contribute a specific amount to his VPF account. Employees can contribute the full amount of DA along with their basic pay. The interest paid on the VPF is as per the EPF plan and the interest accrued is credited to their EPF account. There is no separate VPF account and it is only linked to their EPF account. Therefore it is mandatory to have an EPF account to avail the VPF account. Apart from having a great tax saving option, the Voluntary Provident Fund Scheme helps the depositor achieve long-term capital appreciation and long-term financial goals. This scheme has been accepted largely between the planned classes of society.
Voluntary Provident Fund Benefits
The VPF account is not only a simple and secure investment option but also enables the salaried class with the salary, a medium-term savings option which can be liquid in any financial hard work, with any loss of capital. Apart from its other unmatched benefits, supplemental appeal is high interest rate, which is given on this. All this made the voluntary provident fund a popular option in India between the planned classes.
Any employed person can contribute more than 12% to the extent of his total base salary and dearness allowance. In such a case, VPF provides a better financial solution to secure its future.
- Investments under VPF are done by the employer’s pre-tax income.
- Contribution of employees is entitled for deduction under Section 80C of the IT Act, 1961, subject to a maximum of Rs. 1 lakh.
- Interest is non-taxable until interest rate is more than 9.5%.
- Redemption is tax free even as long as it is not withdrawn before the 5 year maturity period.
- Under the VPF scheme, anyone can expect better yields, because the interest rate is high and is regulated by the Government of India. At present, the interest rate is 8.75%, which is significantly more significant than other plans.
- Under the VPF scheme, the investment amount can be withdrawn from existing employment or retired. This makes VPF a long-term investment solution with the double benefit of post retirement financial planning.
- The employee’s investment towards the VPF account is entitled to Rs 1 lakh for IT deduction benefit.
- In case of change of employment, VPF accounts are easily transferred from one employer to new employer and thus the profits already made in VPF contribution remain intact.
- In the case of unfortunate demise of the account holder, the earned investment will be made without the mess paid to the nominee or legal heir.
Nomination process for voluntary provident fund account
A VPF account is basically a subset of mandatory Employee Provident Fund Account for salaried employees and can be easily nominated by requesting to the concerned Organization Finance or HR team. VPF application form VPF contribution, as per the basic salary and dearness allowance, per month, the basic details are to be given to the employee along with instructions for debiting a special percentage amount.
In addition, the employer must be registered in the EPFO office to provide EPF and VPF facility to its respective employees. For registration purpose, the employer must submit the documents given below for registration.
- A detailed company profile.
- Business Registration Certificate (Form 9 and Form D).
- In the case of MOF-Company Registration Certificate Form 24 and 49 Sdn Bhd’- MOA & AOA
- According to government rules any other document is required.
VPF clearance process
Under the Voluntary Provident Fund Scheme, investment has received huge popularity among the service sector and one of the main reasons for it is liquidity factor. The money accumulated in the VPF account can be withdrawn in the case of any unpredictable and immediate financial emergency.
- Money can be withdrawn in VPF account by a request letter from the employee and form-31, which is to be presented to their respective employer.
- Form-31, which is basically an application for EPF fund, is easily available in various government portals and human resources / finance teams of all organizations.
- Also, it can be easily downloaded from EPFO’s website.
- Details about the necessary documents to be deposited in addition to the form, employee, their postal address, EPF account no. And bank details where maturity / advance income will be deposited, etc. Also submit a canceled check with all the documents.
- The entire document must be submitted and later verified by the respective employer. And then it can easily remove its amount