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Provident Fund: Looking To Earn Maximum Interest On PF Balance? Here’s What To Do

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A person can attain retirement plan objectives by means of good and early investing. One of many some ways to realize your required retirement objectives can be to extend contributions towards Provident Fund (PF). VPF or Voluntary Provident Fund is seen as one such funding avenue within the mounted revenue area.

VPF or Voluntary Provident Fund

In provident fund (PF) you must mandatorily make investments 12 per cent of your wage whereas contributions in VPF are voluntary. Beneath the scheme, workers can voluntarily contribute to their PF account after contributing 12 per cent as per the Workers’ Provident Fund (EPF) guideline.

Any worker can go for VPF which affords a return of 8.10 per cent each year. Additionally, observe that you just get a tax profit beneath Part 80C of the Earnings-tax Act and the returns on maturity are additionally tax-free.

ALSO READ: Senior Citizens Can Invest Extra Rs 15 Lakh In SCSS From April 1, PMVVY To Close (abplive.com)

How can a salaried individual make investments extra in PF?

VPF is an extension of the EPF, often known as PF. The contribution in direction of VPF is created from your wage which is solely voluntary. An EPF account holder can select an extra provident fund contribution in a single’s EPF account by selecting a voluntary provident fund contribution. Kartik Jhaveri, director, Wealth Administration at Transcend Capital explains within the Livemint publication report stated the worker must test with HR on the time of becoming a member of. For those who selected to go for VPF after becoming a member of, then accordingly inform the corporate’s HR and accounts division about it earlier than the start of a brand new monetary yr.

SEBI registered tax and funding professional Jitendra Solanki advised the publication that ideally recruiter will not have any situation if an worker decides to go for VPF as a result of on this case, the employer will not must pay an equal month-to-month contribution to its worker’s VPF contribution.

However that you must be certain that the annual contribution together with month-to-month EPF and month-to-month VPF would not cross Rs 2.50 lakh each year. It’s as a result of as soon as once you cross the Rs 2.5 lakh annual contribution restrict threshold, the return on the EPF contribution above Rs 2.5 lakh will probably be taxable, in response to Solanki as said within the report.

Steps to test EPF contributions

EPF contribution could be simply checked in your wage slip. The second approach is to calculate the 12 per cent of your primary wage to know the obligatory EPF contribution.

How a lot you may make investments through VPF

As soon as you’re conscious of the obligatory annual EPF contribution, merely deduct the identical from Rs 2.5 lakh as a way to understand how a lot you may make investments by means of VPF.

As an illustration, if you’re incomes Rs 50,000 per thirty days as a primary wage, then the obligatory EPF contribution involves Rs 6,000 per thirty days (12 per cent of Rs 50,000). The annual EPF contribution is Rs 72,000 (Rs 6000X12). The utmost quantity comes out to be Rs 1,78,000 (Rs 2.5 lakh subtracted from Rs 72,000) in a monetary yr that you may make investments by means of VPF.

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