Planning for long-term financial goals or retirement, the employees provident fund (EPF) and voluntary provident fund (VPF) are reliable and safe tools at the disposal of a conservative investor looking for consistent long-term returns. As government-backed savings schemes with generally high rate of interest and tax-free payout, the EPF and VPF are effective investment tools.<\/p>\n
EPF and VPF offer 8.25% interest in FY26, but EPF contributions<\/a> are mandated for employee and employers. On the other hand, VPF is a non-compulsory add-on over and above EPF which allows maximum contribution of up to 100% of basic pay and dearness allowance.<\/p>\n Notably, both also have tax-benefit with annual contributions up to \u20b91.5 lakh being exempt under Section 80C<\/a> of the old tax regime.<\/p>\n Voluntary Provident Fund: What is it?<\/p>\n According to the official EPFO website, VPF is excess investment by employees over the mandatory contribution of 12% of DA <\/a>and basic salary each by employees and employer under EPF.<\/p>\n In order to opt for VPF, an employee has to approach their employer, payroll or the HR department at the start of the financial year to provide a declaration form stating the percentage or fixed amount you want to deduct additionally from your monthly salary towards VPF. Please note that you cannot start VPF online through the EPFO <\/a>portal.<\/p>\n VPF taxation rule \u2014 \u20b92.5 lakh threshold, explained<\/p>\n Historically, VPF was entirely tax-free (known as EEE). However, since 2022, the central government has introduced a new rule restricting tax-free interest for very high contributors.<\/p>\n