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Benefits of Investing in VPF

IndianMoney.com Research Team | Posted On Friday, January 25,2019, 04:51 PM

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Benefits of Investing in VPF

 

 

What is VPF?

 VPF or Voluntary Provident Fund is a voluntary contribution towards Employee’s Provident Fund (EPF).   Registering under this scheme is not mandatory and an employee can choose to invest as per his/her discretion.

How to Invest In VPF:

It is very easy to invest in VPF account. Employees must inform employer on the intention to invest in VPF. Employees must inform HR department and give this in writing. They also mention the amount that they would like to contribute towards VPF.

SEE ALSO: Should You Invest In PPF After Rate Cuts?

Benefits of Investing in VPF

  • Contribution towards VPF secures retirement life.
  • VPF Interest rate is higher than FD.
  • Withdrawals made post 5-year lock-in period are tax-free.
  • There is income tax benefit at all stages: contribution, investment, accumulation and returns and even at the time of withdrawal.
  • Employees can withdraw for various reasons like marriage, house purchase, children’s education and so on.

Want to know more on VPF? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

SEE ALSO: Why VPF Is Better Than PPF?

Why VPF Is Better Than PPF

1) VPF offers better returns than PPF

VPF offers the same interest rate as that of EPF. PPF interest rate is updated each quarter while VPF and EPF rates are updated annually. Comparison of interest rates of VPF and PPF shows that VPF is better.

2017-18: VPF interest rate was 8.55% and PPF rate varied between 7.6% and 7.9%

2016-17: VPF interest rate was 8.65% while the PPF rate varied between 8% and 8.1%

2015-16: VPF interest rate was 8.8% while the PPF rate was 8.7%

2014-15: VPF interest rate was 8.75% while the PPF rate was 8.7%

2013-14: VPF interest rate was 8.75% while the PPF rate was 8.7%

The difference between the two has increased over the years in favor of the VPF, which makes it a better choice.

SEE ALSO: Everything You Need To Know On Public Provident Fund

2) Investing in VPF is easy

Investing in VPF is very easy, all you need to do is inform your employer about your intention to invest in VPF, and write a letter to HR department mentioning the amount you would like to contribute towards VPF scheme. For investing in PPF, you must either visit a post office regularly or operate your account online through a designated bank.

Investment is easy as once you inform employer, you don’t have to do anything till you change the job. The amount you wish to contribute towards VPF will be deducted directly from your salary. This ensures investment discipline while making VPF contribution easy. VPF account can be transferred easily as it is linked to your Aadhaar.

3) VPF gives you the same tax benefits as PPF

Contribution towards the VPF is eligible for tax deductions under Section 80C. Just like PPF, contribution towards VPF lets you enjoy the EEE (exempt-exempt-exempt) status vis-a-vis tax deductions. Therefore, your contribution towards VPF is tax deductible under Section 80C, interest earned and maturity amounts are tax free. However, VPF withdrawals made before 5 years are taxed. Considering the interest rates of VPF and PPF along with the returns, it is only wise to invest in VPF over PPF.

VPF interest rates

VPF scheme was launched in 1952. The table below shows the historical interest rates offered on VPF since inception:

Year

 Interest Rate (%)

2017 - 18

8.55%

2016 - 17

 8.65%

2015 - 16

 8.8%

2014 - 2015

8.75%

2013 - 2014

8.75%

2012 - 13

8.50%

2011 - 12

8.25%

2010 - 11

9.50%

2009 - 10

8.50%

2008 - 09

8.50%

2007 - 08

8.50%

2006 - 07

8.50%

2005 - 06

8.50%

2004 - 05

9.50%

2003 - 04

9.50%

2002 - 03

9.50%

2001 - 02

9.50%

2000 - 01

11%

1999 - 2000

12%

1998-99

12%

1997 - 98

12%

1996 - 97

12%

1995 - 96

12%

1994 - 95

12%

1993 - 94

12%

1992 - 93

12%

1991 - 92

12%

1990 - 91

12%

1989 - 90

12%

1988 - 89

11.80%

1987 - 88

11.50%

1986 - 87

11%

1985 - 86

10.15%

1984 - 85

9.90%

1983 - 84

9.15%

1982 - 83

8.75%

1981 - 82

8.50%

1979 - 80

8.25%

1978 - 79

8.25%+0.5 % bonus

1977 - 78

8.00%

1976 - 77

7.50%

1975 - 76

7.00%

1974 - 75

6.50%

1973 - 74

6.00%

1972 - 73

6.00%

1971 - 72

5.80%

1970 - 71

5.70%

1969 - 70

5.50%

1968 - 69

5.25%

1967 - 68

5.00%

1966 - 67

4.75%

1965 - 66

4.50%

1964 - 65

4.25%

1963 - 64

4.00%

1962 - 63

3.75%

196 - 62

3.75%

1960 - 61

3.75%

1959 - 60

3.75%

1958 - 59

3.75%

1957 - 58

3.75%

1956 - 57

3.50%

1955 - 56

3.50%

1954 - 55

3.00%

1953 - 54

3.00%

1952 - 53

3.00%

Advantages of VPF

  • VPF offers higher rate of return than fixed deposits and many small savings schemes.
  • It encourages disciplined investment and forces you to save across working life.
  • VPF has tax benefits.
  • Money invested in VPF is safe.

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