Can Employees Opt for Higher PF Deductions and Still Enjoy Tax Benefits?

Dear All,

Please suggest whether the employer can deduct the employee contribution of PF more than 12% of the basic salary if the employee wishes to do so. Also, will the entire amount of PF be exempted from Income Tax under section 80C? What about the employer contribution on the higher deduction?

Thanks & Regards,
Rajendra
Bangalore

Dear Rajendra, you are right, you can contribute more than 12% (being the compulsory contribution) to EPF. The excess contribution is called VPF (Voluntary PF). You have to inform your HR (Payroll) about the deduction. The VPF is also exempted under section 80C.

There would be no contribution from the employer on the VPF. However, this is eligible for the same interest as declared for EPF. Generally, the PF interest is the highest among similar kinds of saving plans.

The VPF is a very good (can say the best) option for safe investment which gives you tax exemption as well. In the long term, you will see it as more attractive when the interest increases at a faster pace (due to the monthly cumulative method).

I have been contributing to VPF for the last 7 years.