Voluntary Provident Fund or VPF scheme is the sister of PF, just 5 years lock in period, 100% of Basic Pay can be invested

Every person who has an EPF account can invest in Voluntary Provident Fund or VPF. You can invest more in it than in PF. For example, you can invest 12% of your basic salary and DA in EPF.

If you are a salaried person and your PF is being deducted, then there is a very good saving scheme for you related to it. In this, you do not have to open a separate account. You just need to have a PF account. This is an extension of PF, which is called VPF or Voluntary Retirement Fund. You can invest in it apart from PF. Its return is also the same as PF. Which is currently 8.15 percent.

Every person who has an EPF account can invest in VPF. In this, you can invest more than PF. For example, you can invest 12 percent of your basic salary and DA in EPF. On the other hand, in VPF, you can invest 100 percent of your basic salary and the entire DA. In this case, it goes ahead of NPS. In NPS, you can invest only 10 percent of your basic salary along with DA.

Understanding Voluntary Provident Fund or VPF

The Voluntary Provident Fund (VPF) is a powerful and flexible retirement savings option available to salaried employees in India. While the Employee Provident Fund (EPF) is mandatory, contributing to the VPF is optional, making it an attractive choice for those looking to boost their retirement corpus. This blog will delve into the intricacies of VPF, including its benefits, contribution limits, tax implications, and how it compares with other savings schemes.

What is Voluntary Provident Fund (VPF)?

The Voluntary Provident Fund (VPF) is an extension of the Employee Provident Fund (EPF), allowing employees to contribute more than the mandatory 12% of their basic salary and dearness allowance. Contributions to Voluntary Provident Fund (VPF)are made voluntarily, as the name suggests, and are subject to the same interest rate as the EPF, which is determined annually by the government.

Key Features of Voluntary Provident Fund (VPF)

1. Voluntary Contributions

Employees can choose to contribute any percentage of their basic salary and dearness allowance to the Voluntary Provident Fund VPF. There is no upper limit on the contribution amount, allowing employees to save significantly more than the mandatory EPF requirement.

2. High Interest Rate

VPF contributions earn the same interest rate as the EPF, which has traditionally been higher than most other fixed-income investment options. For the fiscal year 2023-24, the EPF interest rate is set at 8.15%.

3. Tax Benefits

Contributions to the Voluntary Provident Fund OR VPF are eligible for tax deductions under Section 80C of the Income Tax Act, up to the overall limit of ₹1.5 lakh per annum. Additionally, the interest earned is tax-free, provided the employee does not withdraw the amount within five years of continuous service.

4. Safe and Secure Investment

The VPF, like the EPF, is backed by the government, making it a safe and low-risk investment option. The principal amount and interest are both secure, ensuring peace of mind for investors.

How to Contribute to Voluntary Provident Fund or VPF

Contributing to the VPF is a straightforward process:

  1. Inform Your Employer: To start contributing to the VPF, an employee needs to inform their employer and submit a formal request, usually through a designated form or a written application.
  2. Payroll Deduction: Once the request is processed, the employer will deduct the chosen VPF amount from the employee’s salary each month and deposit it into the VPF account along with the regular EPF contributions.

Advantages of VPF

1. Enhanced Retirement Savings

By contributing more to the VPF, employees can significantly increase their retirement corpus, ensuring a financially secure post-retirement life.

2. Tax Efficiency

VPF contributions offer tax benefits under Section 80C, reducing the taxable income of the employee. Additionally, the interest earned is tax-free under certain conditions.

3. Compound Interest

The power of compounding works in favor of VPF contributors, as the interest earned each year is added to the principal amount, leading to exponential growth over time.

4. Loan Facility

Similar to the EPF, employees can avail loans against their VPF balance for specific purposes such as home purchase, medical emergencies, and education.

Disadvantages of VPF

1. Limited Liquidity

One of the primary drawbacks of VPF is the lack of liquidity. Withdrawals are restricted, and premature withdrawal can attract taxes if done before five years of continuous service.

2. Interest Rate Fluctuations

The interest rate on VPF is not fixed and can change annually based on government declarations. This variability can impact long-term returns.

3. No Employer Contribution

Unlike the EPF, where both the employee and employer contribute, the VPF is funded solely by the employee, limiting the growth potential compared to EPF.

Comparison with Other Savings Schemes

1. Public Provident Fund (PPF)

PPF is another popular long-term savings option with a 15-year maturity period. While it also offers tax benefits and a government-backed interest rate, VPF generally provides a higher interest rate and is directly linked to the EPF.

2. National Pension System (NPS)

NPS is a retirement-focused investment scheme offering market-linked returns. While it provides higher growth potential due to equity exposure, it comes with market risks, unlike the fixed interest offered by VPF.

3. Fixed Deposits (FDs)

Bank FDs offer fixed returns over a specified period but generally provide lower interest rates compared to VPF. Additionally, the interest earned on FDs is fully taxable.


The Voluntary Provident Fund is an excellent option for salaried employees looking to enhance their retirement savings in a tax-efficient and secure manner. While it offers several benefits, such as high interest rates and tax advantages, it is essential to consider the lack of liquidity and potential interest rate fluctuations. By understanding the nuances of VPF, employees can make informed decisions to build a robust retirement corpus and ensure financial stability in their golden years.

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