You can contribute a maximum of 100% of basic salary and dearness allowance which is more than the conventional PF (Provident Fund) contribution of 12% of one’s basic salary.
VPF Interest rate is equal to that of the PF, and currently is 8.65%.
Withdrawals after the 5-year lock-in period are completely tax-free.
There is income tax exemption at all stages -contribution, investment, accumulation and returns and also at the time of withdrawal.
Employees can access the VPF money for reasons like marriage, house purchase, children’s education, etc.
The contribution to VPF is optional but if the subscriber chooses to make a contribution, he/she will be required to continue the contribution throughout the financial year -just a measure of convenience for one’s employer. There is no mandatory savings limit.
Rules & Guidelines of VPF
Here are some of the basic VPF Rules & Guidelines:
You cannot discontinue or withdraw out of a VPF scheme in the middle of the year.
VPF scheme can be availed only by salaried professionals enrolled with the EPF.
If the direct tax code comes into effect, the entire maturity amount becomes taxable.
You can contribute 100% of basic plus dearness allowance as investment in VPF.
If the VPF money is withdrawn within five years, you will have to pay tax on the interest amount earned from your contribution towards the VPF
14th March 2019