Voluntary Provident Fund (VPF) — 8.25%, With an 80C Catch

VPF earns the same rate as EPF — 8.25% per annum for FY 2025-26 (also 8.25% for FY 2024-25). The rate is declared each year by EPFO and ratified by the government. Interest is calculated monthly on the running balance and credited to the account once a year. VPF returns are guaranteed and government-backed, unlike market-linked options such as NPS or ELSS.

No. The employer matches only the mandatory 12% EPF contribution. Any VPF you contribute on top is entirely your own money — the employer does not add to it. VPF simply increases the employee share going into your EPF account each month.

You can contribute any amount above the mandatory 12%, up to 100% of your basic salary plus dearness allowance. There is no statutory cap on the VPF amount itself, but remember two limits: the 80C deduction is capped at Rs 1.5 lakh, and interest becomes taxable once your total EPF + VPF employee contribution crosses Rs 2.5 lakh in a year.

Yes, under the old tax regime. Your VPF contribution, together with the mandatory EPF employee share, qualifies for a Section 80C deduction within the overall Rs 1.5 lakh ceiling. If your EPF + VPF already fills the Rs 1.5 lakh limit, additional VPF gives no further 80C benefit. Under the new (default) regime, 80C is not available, so VPF gives no deduction there.

No. Section 80C, including EPF and VPF, is available only under the old tax regime. If you have opted for the new regime, VPF contributions do not reduce your taxable income. The account still earns 8.25% and interest stays tax-free within the Rs 2.5 lakh contribution threshold, but the tax-saving reason to prefer VPF largely disappears in the new regime.

Interest on your own EPF + VPF contribution is tax-free as long as your total employee contribution stays within Rs 2.5 lakh in a financial year. Above that, interest on the excess contribution is taxable as income from other sources (the threshold is Rs 5 lakh for government employees where there is no employer contribution). This rule, introduced in Budget 2021, applies regardless of which tax regime you choose.

Yes. Where interest on contributions above the Rs 2.5 lakh threshold becomes taxable, TDS is deducted under Section 194A at 10% once the taxable interest in the year exceeds Rs 5,000. EPFO maintains two sub-accounts — a non-taxable account for contributions within the threshold and a taxable account for the excess — and computes interest separately.

VPF suits salaried employees in the old regime, especially at the 20% or 30% slab, whose combined EPF + VPF contribution stays within Rs 2.5 lakh a year — they get a guaranteed, tax-free 8.25% plus the 80C deduction. It is less attractive for new-regime taxpayers (no 80C), for high earners whose 12% EPF already nears Rs 2.5 lakh (extra VPF interest becomes taxable), and for younger investors seeking higher growth via equity.

A full VPF/EPF withdrawal is completely tax-free if you have completed 5 years of continuous service (including service transferred from a previous employer). It is also exempt if service was cut short due to ill health, the employer closing down, or other reasons beyond your control. Withdrawal is normally allowed on retirement, at 58, or after being unemployed for 2 or more months.

If you withdraw before completing 5 years of continuous service, the 80C deductions claimed on your contributions are reversed and added back to income, and the interest earned becomes taxable. TDS is deducted under Section 192A at 10% (20% if you have not furnished PAN) where the withdrawal amount exceeds Rs 50,000. Withdrawals below Rs 50,000, or with Form 15G/15H where eligible, may avoid TDS.

Yes, VPF follows EPF partial-withdrawal rules. Advances are allowed for specific purposes — house purchase or construction, medical treatment, marriage or higher education, and home-loan repayment — each with its own minimum-service condition. Because VPF sits in the same EPF account, any advance is drawn from the combined balance.

No. Transferring your EPF balance, including the VPF portion, to your new employer's recognised provident fund on a job change is not a taxable event. The service period also carries over, which helps you reach the 5-year mark for tax-free withdrawal. You transfer online through the EPFO portal using your UAN.

Submit a written request to your employer's HR or payroll department specifying the extra amount or percentage of basic + DA you want to contribute beyond the mandatory 12%. Payroll deducts it from your salary and remits it to your existing EPF account under the same UAN. You cannot pay into VPF directly. Most employers accept VPF requests at the start of the financial year; some allow mid-year changes.

VPF is voluntary, but the ability to stop or change it mid-year depends on your employer's payroll policy. Many organisations allow changes only at the start of the financial year, so you may need to wait for the next cycle. Once contributed, the VPF amount stays in your EPF account and continues to earn interest until withdrawal.

VPF currently pays more (8.25% vs PPF's 7.1%) and is very convenient for the salaried since it runs through payroll, but it is available only to EPFO members and its interest can become taxable above the Rs 2.5 lakh contribution threshold. PPF is open to everyone, always tax-free, and useful once VPF interest starts getting taxed or if you are self-employed. Many people use VPF up to the threshold and PPF beyond it.