EPF and VPF (Employee Provident Fund and Voluntary Provident Fund)

Employee Provident Fund (EPF) plays an important role in retirement planning of all salaried individuals.12% of your basic salary will be invested in EPF while your employer will also contribute equal amount towards the same. This is a mandate for all the companies having more than 20 employees.

If you are working for a corporate, look at your CTC (Cost to Company) breakup. It will have an employer contribution and employee contribution towards EPF.

Benefits:

• Tax Free – The investment and the Interest earned through this are absolutely tax free as it is considered under Section 80C of Investment tax act
• Risk free long term Investment – As it is backed by government and not linked to market, the investment is absolutely safe.

Interest rates:

Interest rate for EPF varies every year. It is decided by government. It is fixed at 8.5% for the Financial Year 2013-2014

VPF

VPF is Voluntary Provident Fund. You can have all the benefits of EPF in VPF (Interest Rates and Tax free return) except, your employer will not contribute equal amount of VPF. The maximum percentage of VPF you can invest is 88% as 12% is already mandatory; you can invest 100% of your basic salary in PF (EPF+VPF).  If can approach your employer investing in VPF. The percentage of contribution can vary every financial year

Withdrawal of EPF and VPF

When you leave your company, the PF amount can be withdrawn from the PF account. It will take two months’ time. You can also transfer it to the new employer’s PF account.

Also you can take loans for Housing, wedding and children’s education from the PF account.

But longer you stay in PF without withdrawing; you will have a huge corpus built when the time you retire.

Happy Investing!