When it comes to building long-term financial security, salaried individuals in India usually rely on the Employee Provident Fund (EPF) as their primary savings tool. EPF is mandatory, safe, and tax-efficient. However, many employees are unaware that there is another powerful option that allows them to save even more for retirement while enjoying the same benefits. This option is known as the Voluntary Provident Fund (VPF).

VPF is ideal for those who want to increase their retirement corpus without taking market risks. Let’s understand what VPF is, how it differs from EPF, and why it can be a smart addition to your financial planning.

EPF vs VPF: Understanding the Basics

Every salaried employee contributes a portion of their salary towards EPF each month. This deduction helps create a retirement fund that grows steadily over time. However, the contribution under EPF is capped, which may feel insufficient for employees aiming for a larger retirement corpus.

This is where VPF steps in, offering flexibility and higher savings potential.

What Is Employee Provident Fund (EPF)?

The Employee Provident Fund (EPF) is a compulsory retirement savings scheme for eligible employees. Under this scheme:

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  12% of your basic salary and dearness allowance is deducted every month

  
  


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  An equal contribution is made by your employer

  
  


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  The contribution limit is fixed as per government rules

  
  


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  The interest rate is declared annually by the government

  
  

EPF ensures disciplined savings and provides financial stability after retirement.

What Is Voluntary Provident Fund (VPF)?

The Voluntary Provident Fund (VPF) allows employees to voluntarily contribute more than the mandatory 12% of their salary into their provident fund account.

Key features of VPF include:

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  Completely optional for employees

  
  


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  Contribution can go up to 100% of basic salary and DA

  
  


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  No additional contribution from the employer

  
  


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  Earns the same interest rate as EPF

  
  

This makes VPF a powerful tool for employees who want to save more without switching to risky investments.

Key Differences Between EPF and VPF

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  Nature: EPF is mandatory, while VPF is voluntary

  
  


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  Employer Contribution: EPF includes employer contribution; VPF does not

  
  


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  Investment Flexibility: EPF has a fixed rate; VPF allows higher employee contribution

  
  


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  Interest Rate: Both earn the same government-declared interest

  
  

Major Benefits of Investing in VPF

1. Safe and Risk-Free Investment

VPF is backed by the government, making it one of the safest long-term investment options available to salaried individuals.

2. Higher Interest Compared to Traditional Savings

VPF offers returns that are generally higher than bank fixed deposits and savings accounts, making it an attractive option for conservative investors.

3. Significant Tax Benefits

Contributions to VPF qualify for tax deduction under Section 80C of the Income Tax Act. Additionally, the interest earned and maturity amount are tax-free, subject to prevailing tax rules.

4. Encourages Disciplined Savings

Since VPF contributions are deducted directly from salary, it ensures consistent and automatic savings without any manual effort.

How to Start Investing in VPF?

Starting VPF is simple:

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  Submit a request to your company’s HR or payroll department

  
  


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  Mention the percentage or amount you wish to contribute as VPF

  
  


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  Contributions can usually be changed once in a financial year

  
  

Once activated, the amount is automatically credited to your PF account every month.

Who Should Consider VPF?

VPF is suitable for:

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  Salaried individuals with stable income

  
  


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  Employees looking for low-risk, long-term savings

  
  


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  Those who want to maximize tax benefits under Section 80C

  
  


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  Investors planning a strong retirement corpus

  
  

Conclusion

Voluntary Provident Fund is an excellent extension of EPF for employees who want to save more without taking unnecessary risks. With guaranteed returns, tax efficiency, and disciplined savings, VPF can play a crucial role in strengthening your financial future. When combined with EPF, it becomes a powerful retirement planning strategy that offers peace of mind and long-term security.