Boosting Your Retirement Savings with Voluntary Provident Fund (VPF)

Boosting Your Retirement Savings with Voluntary Provident Fund (VPF)

It is necessary to save for retirement to be financially secured after retiring. While regular income allows you to meet current expenses, building a retirement corpus is essential for a comfortable post-retirement life. Thankfully, several investment options can help you achieve this goal. One such option, particularly beneficial in India, is the Voluntary Provident Fund (VPF).

What is VPF?

VPF is an optional contribution scheme that allows salaried individuals to invest additional funds over and above their mandatory Employees' Provident Fund (EPF) contribution. Unlike EPF, where both employer and employee contribute a fixed percentage of the salary, VPF is solely an employee-driven savings plan.

Why Consider VPF?

Here's why VPF can be a smart addition to your retirement planning strategy:

• Tax Benefits: VPF contributions qualify for tax deductions under Section 80C of the Income Tax Act, 1961. This lets you reduce your taxable income amount, thereby lowering your tax liability. The maximum tax-deductible contribution for both EPF and VPF combined is Rs. 1.5 lakh per annum.
• Government Backing and Guaranteed Returns: The Indian government manages VPF, making it a safe investment option. The interest rate on VPF is set annually by the government and is currently at 8.15% (for the financial year 2023-24). This provides a guaranteed return on your investment, unlike market-linked investment options that carry inherent risks.
• Long-Term Savings Discipline: By opting for VPF, you inculcate a habit of regular savings towards your retirement. The contributions are deducted directly from your salary, ensuring a disciplined approach to saving and preventing you from spending that money.
• Portability: A significant advantage of VPF is its portability. Unlike some other retirement plans, your VPF account can be transferred seamlessly between employers. This eliminates the need to withdraw funds and potentially lose out on tax benefits when you change jobs.
• Flexibility in Contribution Amount: There's no fixed minimum contribution requirement for VPF. You can decide how much you want to contribute each month, up to a maximum of 100% of your basic salary and dearness allowance. This allows you to tailor your VPF contributions to your financial situation and retirement goals.

How to Open a VPF Account?

Opening a VPF account is a straightforward process. Here's what you need to do:

1. Contact your HR department: Inform your employer or HR department in writing about your intention to open a VPF account and contribute an additional amount to your provident fund.
2. Fill out the VPF application form: You may be required to fill out a VPF application form provided by your employer.
3. Specify your contribution amount: Indicate the amount you wish to be deducted from your salary every month as your VPF contribution.

Once you complete these steps, your employer will initiate the process of linking your existing EPF account to a VPF account.

Accessing Your VPF Balance

You can check your VPF balance online using the Employees' Provident Fund Organization (EPFO) website. Here's a quick guide:

1. Visit the official EPFO website (https://www.epfindia.gov.in/).
2. Click on 'Our Services' and select 'For Employees'.
3. Choose 'Member Passbook' under 'Services'.
4. Enter your Universal Account Number (UAN) and password, and click on 'Login'.
5. Select your Member ID and click on 'View Passbook'.
6. Your EPF passbook will display all the details regarding your account, including your VPF balance.

In Conclusion

VPF’s a valuable tool for salaried individuals in India to build a substantial retirement corpus. With its tax benefits, government backing, guaranteed returns, portability, and flexible contribution options, VPF offers a secure and convenient way to save for your golden years.