In a world where financial stability is a priority, tax-saving investments like the Voluntary Provident Fund (VPF) have become indispensable for salaried individuals. With its ability to offer tax benefits under Section 80C and a government-backed guarantee, VPF is a reliable choice for long-term savings. However, to build a well-rounded portfolio, it is essential to complement VPF with other safe investment options like Bajaj Finance Fixed Deposit. This article delves into the tax-saving benefits of VPF and highlights how integrating it with fixed deposits can help you achieve your financial goals. Check latest rates.
Tax Efficiency of Voluntary Provident Fund (VPF)
Explore how Voluntary Provident Fund (VPF) offers high tax efficiency with Section 80C benefits, tax-free interest, and safe long-term returns
What is the Voluntary Provident Fund (VPF)?
The Voluntary Provident Fund (VPF) is an extension of the Employee Provident Fund (EPF) that allows salaried employees to contribute more than the mandatory 12% of their basic salary and dearness allowance. While employers are not required to match the additional contributions, the VPF offers a secure way to boost retirement savings. It is available exclusively to salaried employees with an EPF account, making it an excellent option for those looking to enhance their financial security.
Voluntary Provident Fund tax benefit
One of the primary reasons why VPF is a preferred choice for many is its tax efficiency. It falls under the EEE (Exempt-Exempt-Exempt) category, meaning:
- Contributions are tax-deductible under Section 80C, up to Rs. 1.5 lakh annually.
- Interest earned is tax-free for contributions up to Rs. 2.5 lakh annually for private employees and Rs. 5 lakh for government employees.
- Maturity proceeds are tax-free if withdrawn after five years.
These tax benefits make VPF a compelling option for individuals looking to save on taxes while building a secure retirement corpus.
VPF vs other tax-saving investments
When it comes to tax-saving investments, options like Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and Tax-Saving Fixed Deposits (FDs) often come to mind. However, how does VPF compare?
| Feature | VPF | PPF | ELSS | FD (Tax-Saving) |
|---|---|---|---|---|
| Interest Rate | ~8.25% | ~7.1% | Market-Linked | ~6-7% |
| Tax Deduction | Section 80C | Section 80C | Section 80C | Section 80C |
| Tax on Returns | Tax-Free | Tax-Free | Taxable | Taxable |
| Risk | Low | Low | Moderate to High | Low |
| Lock-in Period | 5 Years | 15 Years | 3 Years | 5 Years |
While VPF offers higher returns and tax-free benefits, it is important to diversify your portfolio with other secure options like Bajaj Finance Fixed Deposit. With assured returns and flexible tenures, an FD can act as a stable financial cushion. Book FD.
How to invest in VPF
Investing in VPF is a straightforward process. Here is a step-by-step guide to help you get started:
- Inform your employer or HR department about your intention to contribute to VPF.
- Specify the percentage of your basic salary and dearness allowance that you wish to contribute.
- Your employer will then deduct the specified amount from your salary and deposit it into your EPF account.
Keep in mind that contributions cannot be altered or stopped mid-year. Changes can only be made at the start of a new financial year.
Why choose VPF for tax saving?
VPF stands out as a tax-saving investment due to its unique features. Here are some reasons why it is an excellent choice:
- High Returns: Offers one of the highest guaranteed returns among fixed-income instruments.
- Tax Efficiency: Contributions, interest, and maturity proceeds are tax-exempt under specific conditions.
- Government-Backed Security: Provides peace of mind as it is supported by the Government of India.
- Ease of Contribution: Automated salary deductions make it hassle-free.
- Long-Term Wealth Creation: Compound interest ensures significant growth over time.
- Financial Discipline: Regular contributions help inculcate a habit of saving.
By integrating disciplined budgeting habits with secure investment options like Bajaj Finance Fixed Deposit, you can achieve financial stability and peace of mind. Plan smarter, save better, and grow your wealth today. Open FD.
Conclusion
The Voluntary Provident Fund is a robust financial tool for individuals seeking tax efficiency and long-term wealth creation. Its government-backed security, high returns, and tax benefits make it a standout choice for salaried individuals. However, to build a diversified and balanced portfolio, it is wise to complement your VPF investments with secure options like Bajaj Finance Fixed Deposit. Offering assured returns of up to 7.30% p.a. for senior citizens and flexible tenures ranging from 12 to 60 months, Bajaj Finance FD is a reliable choice for those aiming to achieve financial stability.
Start planning your financial future today by integrating the Voluntary Provident Fund with Bajaj Finance Fixed Deposit for a secure and prosperous tomorrow.
Frequently Asked Questions
Can VPF save tax in a new tax regime?
Under the new tax regime, there are no deductions under Section 80C, so VPF contributions will not provide tax savings.
How much of VPF is tax-free?
Interest earned on contributions up to Rs. 2.5 lakh annually for private employees and Rs. 5 lakh for government employees is tax-free.
Will TDS reduce if invested in VPF?
No, TDS is not applicable on VPF contributions as they are tax-exempt under specified conditions.
More Articles
Related Videos
All you need to know about our Fixed Deposit
How to choose the right tenure
What is the eligibility criteria for our FD
Fixed Deposits versus other investment options
Bajaj Finserv app for all your financial needs and goals
Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.
You can use the Bajaj Finserv App to:
- Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
- Invest in fixed deposits and mutual funds on the app.
- Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
- Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
- Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
- Shop from over 100+ brand partners that offer a diverse range of products and services.
- Use specialised tools like EMI calculators, SIP Calculators
- Check your credit score, download loan statements and even get quick customer support—all on the app.
Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.
Download App
Now request money from your friends and family and make instant payments.
- 1. Apply for Loans: Choose from personal, business, gold loans and more
- 2. Transact: Pay utility bills, use UPI, get FASTag and more
- 3. Shop: Buy over 1 million products on No Cost EMI
- 4. Invest: Buy stocks, mutual funds and invest in FD