Voluntary Provident Fund is a type of conventional provident fund savings plan which allows the contributor to choose the amount of a monthly fixed contribution to the plan. Employees are authorised to make voluntary contributions to their provident fund account under this plan, which is also known as voluntary retirement fund. The scheme excludes the employee's statutory contribution of 12% to the Employees' Provident Fund (EPF).
How is VPF advantageous for employees?
The VPF account is classified as Exempt-Exempt-Exempt (EEE). Employees can thus profit from tax advantages while also earning a significant amount of money over time by investing in the VPF. Here are some benefits of VPF.
There are no dangers associated with investing in the scheme because it is run by the Indian government. Investing in a VPF account is very safe when compared to other long-term investment choices given by private organisations.
The rate of interest under the VPF plan is 8.50 percent per annum. The interest earned on the contributions is also tax-free.
The procedure for opening a VPF account is straightforward. Employees can submit a registration form to their employer's finance department, requesting that they start a VPF account. The existing EPF account will also be used as the VPF account.
It is relatively simple for employees to transfer the VPF account from their previous employment if they change jobs.
Documents required to open a VPF account
- Form 49 and Form 24
- A document from the Ministry of Finance confirming the company's registration.
- The articles of association and memorandum must be submitted by SDN BHD organisations.
- Certificate of incorporation for the company.
- Organizational profile in detail
How to withdraw money from a VPF account?
The fund permits partial withdrawals in the form of loans, as well as full withdrawals. If the withdrawal occurs before the 5-year minimum term, the cumulative maturity amount will be subject to tax. The ultimate maturity payment is paid to the employee when he resigns or retires from his job. The nominee can inherit the accumulated funds in the VPF account in the event of the account holder's untimely death.
The VPF fund is popular because the money accumulated can be withdrawn at any moment. In the event of a financial emergency, one can always rely on his VPF account.
Employers are not mandated to contribute to their employees' VPF accounts. Similarly, an employee is not obligated to contribute to the plan. Once a contribution has been selected in the VPF, it cannot be terminated or discontinued until the base tenure of 5 years has expired.
Investing in a voluntary provident fund is a practical alternative for building a substantial savings account and ensuring financial independence after retirement. While applying for the same, keep the documentation and important information available to avoid any last-minute hassles.
