A Voluntary Provident Fund (VPF) is a voluntary savings scheme provided by employers in India. The VPF functions similarly to the Employee Provident Fund (EPF), but with the key distinction that EPF contributions are mandatory for employees, while VPF contributions are voluntary.
Employees participating in VPF have the option to make additional contributions to their provident fund account beyond the mandatory contributions to EPF. The interest rate offered on VPF is generally higher than that of other savings options, such as savings accounts and fixed deposits. This allows the money to grow at a faster rate. Contributions made to VPF are deducted from the employee’s salary before taxation, leading to potential tax savings. The interest earned on the accumulated amount is also typically tax-exempt. Employees can choose the percentage of their salary to contribute to the VPF account.