Voluntary Provident Fund (VPF) is an extension of the Employee Provident Fund (EPF) that allows salaried individuals to contribute more than the mandatory 12% of their basic salary towards their retirement savings. Managed by the Employees’ Provident Fund Organisation (EPFO), the VPF is a government-backed, low-risk investment option offering both financial security and long-term wealth creation benefits.

Under the VPF scheme, employees can voluntarily increase their contribution up to 100% of their basic salary and dearness allowance. The employer, however, is not required to match this additional contribution. These funds earn the same rate of interest as the EPF, which is reviewed annually by the government. The returns are tax-free, provided the investment and interest remain intact for at least five consecutive years.

Tax benefits are one of the major attractions of VPF. Contributions qualify for deductions under Section 80C of the Income Tax Act, up to _1.5 lakh per year. Additionally, the interest earned and the maturity amount are exempt from tax, making it an Exempt-Exempt-Exempt (EEE) instrument. However, if the employee withdraws the amount before five years of continuous service, the interest becomes taxable.

Since the VPF is directly linked to an individual’s EPF account, it offers the same level of safety and government assurance. It is ideal for risk-averse investors looking for stable returns and long-term corpus building for retirement, without exposure to market volatility. Contributions can be modified annually based on financial goals and income changes.

In summary, Voluntary Provident Fund is a disciplined, tax-efficient, and secure savings avenue for salaried professionals aiming to strengthen their retirement portfolio while enjoying consistent, government-backed returns.