Kolkata: Voluntary Provident Fund, or VPF in short, is a voluntary fund contribution from the employees. It can be viewed as an extension of the EPFaccount
of the employee. The amount that accrues through VPF is over and above the 12% contribution of an employee in his/her EPF account. There is a significant point about VPF. An employee can volunteer to contribute even up to 100% of the cumulative amount of basic salary and dearness allowance. What’s more significant is that the rate of interest payable on VPF is of the same rate that is paid in EPF account. This is indeed significant since the rate of EPF interest is the highest among all guaranteed-return instruments in the country. EPF carries sovereign guarantee and so does VPF. Like EPF, VPF is managed by EPFO (Employees’ Provident Fund Organisation) which functions under the Union labour ministry. However, most employees who are covered by EPF have no idea of VPF or its benefits.
Is VPF a good investment
For an employee who wants to accumulate funds by prioritising safety above anything else — and a lot of salaried people actually wants it — VPF is an excellent option. If EPF is tailormade for post-retirement life, VPF beefs it up and in an equally secure way, generating the same returns. Therefore, combination of EPF and VPF is very potent for a senior citizen. The rate of interest is announced every year by the EPFO. It has been 8.25% for the past few years.
How to apply for VPF
Opening a VPF account is easy. To open a VPF account an employee has to write to the human resource or finance department. The employee must indicate that he/she wants to opt for VPF and indicate the amount of money that should be deducted every month from his/her salary. The existing EPF account will serve as the additional VPF account.
Minimum tenure of VPF
However, one must note that employers are not obliged to contribute to their employees’ VPF portfolio as they have to contribute to EPF. Like EPF it is not mandatory to contribute to VPF. There is another important rider. Once an employee indicates his/her contribution to VPF, it cannot be terminated at will. Once initiated, VPF must be continued for five years.
