Definition
Voluntary Provident Fund (VPF)
VPF lets salaried employees voluntarily contribute more than the mandatory EPF amount, earning the same high interest rate.
The Voluntary Provident Fund (VPF) is an option for EPF members to contribute more than the mandatory 12% of basic salary, up to 100% of basic plus DA, into their provident fund. The extra contribution earns the same interest rate as EPF, which is typically attractive and government-declared.
VPF shares EPF's safety and tax benefits — contributions qualify under Section 80C — though interest on very large employee contributions above an annual threshold has become taxable under recent rules. It is a simple way for risk-averse salaried savers to boost retirement savings.
Because it piggybacks on EPF, there is no separate account or paperwork beyond instructing your employer. The lock-in mirrors EPF, so VPF money is best treated as long-term retirement savings.
Related terms
- Section 80CSection 80C allows a deduction from taxable income for specified investments and expenses, such as EPF, PPF, ELSS, life insurance premiums and home-loan principal, under the old regime.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.