Provident Fund: Voluntary contribution can assist you develop your retirement corpus

Provident Fund (PF) contribution is necessary for all Employees’ Provident Fund (EPF) and PF account holders. As per the Employees’ Provident Fund Organisation (EPFO) norms, an worker is sure to contribute 12 per cent of its fundamental wage into one’s PF or EPF account. Similarly, the EPFO rule says that the recruiter can even contribute 12 per cent of the staff’ fundamental wage within the EPF or PF account of the worker. However, if an worker desires, she or he can add extra into its EPF or PF account by opting Voluntary Provident Fund (VPF). This helps the worker create extra money in a single’s PF account with the passé of time.

Speaking on how VPF helps an EPF account holder Kartik Jhaveri, Director — Wealth Management at Transcend Consultants stated, “PF interest rate of 8.5 per cent (which is available in VPF) is highest among all small saving schemes. The EPFO allows an EPF or PF account holder to opt for the VPF and invest beyond 12 per cent of its basic salary in one’s provident fund account. However, for this VPF contribution made by the employee, the employer will not contribute any additional amount. The employer will only contribute 12 per cent of the employee’s basic salary, which is mandatory for both employee and the employer.”

Jhaveri stated that in VPF, the worker will get all revenue tax advantages which can be obtainable for its PF contribution. However, Jhaveri stated that after funding VPF shall be a part of one’s PF account and there shall be no separate withdrawal rule for PF/EPF and VPF. So, one ought to ensure that than the cash she or he is investing is supposed for one’ post-retirement fund. He stated that VPF contribution helps PF stability develop at a quicker charge as extra curiosity yield with compounding profit within the long-term will result in increased retirement fund in a single’s PF account.

On how one can begin VPF contribution SEBI registered tax and funding knowledgeable Jitendra Solanki stated, “One can opt for the VPF at the time of joining by asking the recruiter to deduct VPF from its monthly salary. In case, the employee fails to do this at the time of joining, it can ask for VPF deduction in the month of April from its recruiter while making tax and investment declaration.” Jhaveri additionally stated that VPF is a lot better than tax saving small saving schemes like PPF, Post Office financial savings, and many others as PF rate of interest will all the time stay increased than different government-backed schemes.

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