Are you a salaried person and seeking a safe yet rewarding long-term investment option? Mutual Funds ‘Sahi hai’ is lucrative but riskier! It is Voluntary Provident Fund (VPF) you actually need to know about for the best investment option.
What is Voluntary Provident Fund (VPF) ?
The Voluntary Provident Fund (VPF) is an extension of Employee Provident Funds (EPF) with almost all the benefits, including tax benefits and highest in-class interest rates. Similar to EPF, investments made in VPF is highly safe as backed by the government itself.
Unlike EPF, where you can invest only 12% of your monthly Basic and Dearness Allowance, VPF allows you to invest upto 100% of these two salary components at the same interest rates as offered in EPF.
Best-in-Class Interest Rate
The interest rate offered on VPF investment is highest among its peer option such as Public Provident Fund (PPF) or Bank Fixed Deposit (FD). Despite the recent interest cuts, VPF continues to pay 8.65% which is higher than 7.9% paid in PPF, 7-7.5% paid in FD.
Tax Efficient Investment
Other than being risk-free, VPF investments are tax efficient too. VPF falls in the ‘Exempt-Exempt-Exempt’ category. This means investments made in VPF attracts three levels of income tax exemptions.
Firstly, the principle investment upto Rs. 1,50,000 is eligible for tax deduction u/s 80C. Secondly, the interest earned is exempted from tax. Thirdly, the amount earned on maturity of the scheme is also tax exempted.
Although, the investment amount exceeding Rs.1,50,000 doesn’t qualifies for tax deduction u/s 80C, yet the interest earned on excess investment is still exempted. These sharp tax advantages make VPF the most preferred long-term investment options for salaried-class persons.
In the series of advantages, here is another one. The process of enrolling for VPF is very easy. Employee just needs to inform employer about the amount which he/she wish to invest in VPF and employer shall ensure the proper and timely investment from the salary. Hence, you can opt for VPF and just sit back and relax as your money is multiplying safely!