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Should You Increase Your VPF Contribution After EPF Interest Rate Hike?


Even though before being binding, the recommendation by the EPFO body to hike EPF rates, it has to be approved by the finance ministry. But still the employee union is seen rejoicing as its highly likely that the proposal will likely go through in the wake of general elections due in April-May 2019.

Should You Increase Your VPF Contribution After EPF Interest Rate Hike?

So, those who have included VPF as part of their investment kitty, can now consider increasing their contribution towards it, the prime reason being that VPF fetches the same returns as EPF account.

And further more, its appeal for a conservative investor increases due to its risk free and tax-free nature. Also, the return on EPF i.e. higher by 1% in comparison to other debt instruments makes it even more lucrative. So, experts suggest to have a share of VPF investment in every salaried class debt portfolio. And those in their yester-years can without a second thought need to have allocation into VPF fund.

Another advantage of VPF in a person's portfolio is that it is allowed a deduction under Section 80 C, but with no cap as in the case of EPF and other investments which is capped to a maximum of Rs. 1.5 lakh in a year.

Also, there is given flexibility, whereby employee can consider an increase or deduction towards the VPF account twice a year. Notably, there is a drawback also in respect of the VPF account, which allows complete withdrawal only upon retirement.

Read more about: vpf epf provident fund
Story first published: Friday, February 22, 2019, 15:39 [IST]
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