Very few tools have “fixed rate” & “tax-free” tag related to them. Considering ultimate 12 months when charges in fastened deposits had been at lowest and debt finances being extremely risky, Voluntary Provident Fund is a perfect selection for debt investments. Let’s see the main points.
The benefit of making an investment in voluntary provident fund lies in the truth that now there are only a few investments in the debt class that proceed to offer very horny returns. We all know Debt & Equity cross hand in hand and asset allocation is the important thing to stability chance and make just right returns.
VPF is an addon to the prevailing Employees Provident Fund (EPF).
Voluntary Provident Fund(VPF) has noticed the least reduce in charges in fresh instances. The EPF and the extension VPF also are extremely tax-efficient and secure.
Voluntary Provident Fund Details
VPS is just for salaried staff having PPF deduction. 
Someone who already has an EPF or GPF deduction of 12% of your fundamental and dearness allowance can avail VPF.
In EPF the employer suits the contribution with a an identical quantity. The rule says you can not building up your EPF. But you’ll be able to building up your contribution voluntarily and the employer won’t give a contribution the rest in this.
You can make investments as much as 100% of your fundamental and dearness allowances in the VPF. The VPF will earn the similar price because the EPF and accumulates in your EPF account.
As mentioned employer will best give a contribution 12%. Beyond that it is named VPF and employer isn’t certain to give a contribution the rest in this contribution.
VPF is not anything however your contribution to EPF above 12% prohibit.
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The VPF is invested in the similar way as EPF. In truth, it’s the identical fund. For subscribers laws pertaining to the EPF-including lockin, withdrawal, loans, and taxation additionally observe to the VPF.
The key enchantment of VPF Is the prime price it enjoys like EPF.
Employee Provident Fund Organization (EPFO) has fastened the velocity on EPF balances for 2017-18 at eight.65%. For 2018-19 EPFO has really useful for eight.55%.
The different main benefits of EPF and VPF is protection. They are as secure because the charges are assured via the federal government thru Ministry of Labour.
The 3rd reason why is tax receive advantages.
You get receive advantages below Sec 80C on contributions. Also, passion earned is exempt from tax, and so is the adulthood quantity –this is, those investments come below the Exempt-Exempt-Exempt (EEE) class.
If you examine it with financial institution FD now, the FD charges for three years are round 7%. The passion is taxable with the one exemption of Rs 10000 consistent with 12 months (Rs 50Okay for Senior Citizens).
Some extra issues earlier than you get started making an investment in Voluntary Provident Fund
The investments in VPF is roofed below Section 80C (as much as the entire prohibit of rupees 1.five lakh a 12 months). 
You can make investments greater than this prohibit, however won’t get the preliminary tax wreck. The passion earned and the corpus despite the fact that will proceed to be exempt from tax. The most quantity that you’ll be able to make investments is 100% of Basic & DA.
The charges on EPF and VPF trade once a year and are fastened via the EPFO Department.
Also with the EPFO step by step expanding publicity to fairness investments (15% now with an offer to extend to 50%) the returns might building up in long term and lose their correlation with debt tools.
Process of making an investment in VPF
The procedure or forms for making an investment in the VPF could be very easy. You best have to tell your employer concerning the further quantity you need to give a contribution to the VPF. The quantity gets deducted out of your per thirty days pay.
Some employers permit staff to sign up for VPF and make adjustments to the quantity contributed on a per thirty days foundation others permit this as soon as or a couple of instances in a 12 months.
My query is- are you searching for Debt Investment below your asset allocation for long-term objectives like retirement?
Yes, it’s just right debt investments however doesn’t cross overboard together with your VPF allocation should you don’t want it. We attempt to bend in opposition to “fixed”, however one will have to make investments strictly as consistent with his asset allocation.
Contribution to VPF reduces your per thirty days take-home pay to that extent. There isn’t any level making an investment closely in case your per thirty days price range suffers.
An funding portfolio must have a just right mixture of debt, fairness and different investments. Equity investments in a smartly controlled mutual fund portfolio have attainable to ship a lot awesome returns in long run.
Hope now you already know the idea of voluntary provident fund, its advantages, and different main points.
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Summary
Article Name
Voluntary Provident Fund – A Good Choice in Fixed Income
Description
Know the concept that of voluntary provident fund, its advantages, interest rate, taxation and different main points. Yes, it’s just right debt investments however don’t cross overboard together with your VPF allocation should you don’t want it.
Author
Madhupam Krishna
Publisher Name
WealthWisher Financial Planners & Advisors
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