Maximum return, minimum risk! why voluntary pf is the best plan for salaried employees

Maximum return, minimum risk! Why voluntary PF is the best plan for salaried employees

Maximum return, minimum risk! Why voluntary PF is the best plan for salaried employees on . The return you earn will be the same as in EPF

Latest News With interest rates on bank deposits (both fixed and savings) and small savings instruments headed downward, fixed-income investors are on the lookout for a product that can give them an attractive rate of return without having to court risk. One instrument is Voluntary Provident Fund (VPF). If you are a salaried employee, 12 per cent of your basic salary plus dearness allowance would already be going into the Employees' Provident Fund (EPF) each month. Your employer would be making a matching contribution. In addition, you can also invest up to 100 per cent of your basic salary plus dearness allowance in VPF. The returns you earn will be the same as in EPF. EPF gave a return of 8.65 per cent in 2016-17. This is better than the rate offered by Post Office small savings schemes (see table). The State Bank of India now offers 5.50-6.75 per cent on its fixed deposits. The best rates offered by any bank go up to 7.50 per cent (about 50 basis points higher for senior citizens) for a tenure of up to five years. The rate offered on EPF/VPF for 2017-18 will be known only in November-December or later. While it could decline from the current level if interest rates within the economy continue to fall, the returns from EPF/VPF are likely to be the most attractive on the fixed-income side.

Bear in mind, though, that your employer doesn't make a matching contribution to VPF. Besides the return, another attractive aspect of VPF is that, like EPF, it enjoys EEE (exemptexempt-exempt) status. Many small savings instruments (such as National Savings Certificate and Kisan Vikas Patra) and bank fixed deposits get taxed at maturity at the individual's marginal tax rate. In addition, you also enjoy tax deduction under Section 80C up to Rs 1.5 lakh in VPF. To enrol for VPF, get in touch with your office's human resource department and inform it in writing about the percentage of your basic salary plus dearness allowance you would like to contribute.

Maximum return, minimum risk! why voluntary pf is the best plan for salaried employees

Published on Sep 8, 2017Business

Dimple Shah

With interest rates on bank deposits (both fixed and savings) and small savings instruments headed downward, fixed-income investors are on the lookout for a product that can give them an attractive rate of return without having to court risk. One instrument is Voluntary Provident Fund (VPF). If you are a salaried employee, 12 per cent of your basic salary plus dearness allowance would already be going into the Employees' Provident Fund (EPF) each month. Your employer would be making a matching contribution. In addition, you can also invest up to 100 per cent of your basic salary plus dearness allowance in VPF. The returns you earn will be the same as in EPF. EPF gave a return of 8.65 per cent in 2016-17. This is better than the rate offered by Post Office small savings schemes (see table). The State Bank of India now offers 5.50-6.75 per cent on its fixed deposits. The best rates offered by any bank go up to 7.50 per cent (about 50 basis points higher for senior citizens) for a tenure