What is VPF (Voluntary Provident Fund)?
VPF is a voluntary extension of the EPF scheme in India. While EPF mandates a 12% contribution from your basic salary, VPF allows you to contribute up to 100% of your basic salary. The interest rate is the same as EPF (currently 8.15% for 2023-24), and contributions are tax-deductible under Section 80C up to ₹1.5 lakh.
Why Choose VPF Over Other Investments?
VPF offers a rare combination of high returns (8.15%), sovereign guarantee, tax benefits under Section 80C, and tax-free interest (up to ₹2.5 lakh annual contribution). Unlike PPF which has a ₹1.5 lakh annual limit, VPF allows unlimited contribution as a percentage of basic salary. It's ideal for risk-averse investors seeking guaranteed, tax-efficient returns.
How VPF Compound Interest Works
VPF interest is calculated monthly but compounded annually. Your monthly contribution plus employer match earns interest which is added to the balance at year-end. Over 25 years, the power of compounding can turn modest monthly contributions into a substantial retirement corpus. The earlier you start, the larger the effect.