Can You Maximize Your VPF Contribution Without Paying Extra Tax? Let's Clarify!

Max VPF, a private salaried class employee, can claim to avoid tax as per the new income tax law. Like last year, the Income Tax Department created a new law according to which if the contribution to PF is more than 2.5 lakh, then the amount beyond this 2.5 lakh will be taxable. Something like that.

Please confirm for me how much one can contribute beyond the PF amount so that the excess VPF will not fall into the taxable category.

Thanks

Provident Fund and Voluntary Contribution of PF
Provident Fund and Voluntary Contribution of PF are exempted within the limits of 80C. 80C has a capping of Rs 1,50,000. As such, even if you contribute more than Rs 1,50,000 towards PF, the tax benefit will be restricted only to Rs 1,50,000. This shall include PF, life insurance premium, housing loan principal repayment, fixed deposit for more than 5 years' duration, and a few other investments.

Therefore, if you do not have other investments coming under the exemption admissible under 80C, i.e., housing loan, life insurance, FD, etc., then contributing to PF for any amount higher than Rs 1,50,000 will not give you any benefit in respect of income tax.

Hi Madhu.T.K, I am asking about the rule the government introduced last year, where the amount of PF/VPF exceeding 2.5 lakh would be taxable.

That is as per the Income Tax Act. I think it is applicable to interest on PF contributions and not the contribution itself, and the entire employer's contribution will still be non-taxable. Please check with Income Tax sites for details.