At a time when investment instruments across deposits and small saving schemes have seen a downward trajectory in respect of returns for you, you can consider VPF as a good instrument to recoup better returns.
So, how much amount you can park in the voluntary PF account and returns on it
In the EPF account, 12% of your basic salary and DA is contributed by you and the same contribution is made by your employer on a monthly basis. EPF for the financial year fetched 8.65% p.a.
While in the VPF account, you can park a maximum of 100% of basic salary and dearness allowance. So, being a voluntary account, you will have to subscribe to it. And the account fetches return at par with EPF i.e @ 8.65%.
Though there have been views that the EPFO body may reduce returns on EPF account to 8.4% for the financial year 2017-18. However the clarity in this respect shall be made only as early as November or December.
Advantages of Maintaining VPF account
Returns better than government backed small saving schemes as well as fixed deposits which currently are a maximum of 7.5% for senior citizen. Except few payment banks that have come up with lucrative return offers.
Taxation benefits: VPF is entitled for tax deduction under section 80C up to a maximum of Rs. 1.5 lakhs. Also these investments qualify as a EEE status ie. No tax on investment, maturity or redemption
No risk but as government is considering to increase its equity holding in the fund, risk is likely to increase.
Also, VPF account should be opened after a complete budgeting exercise as a situation should not arise that you fall short of funds and cant liquidate your investments in VPF as it is a long-term lock-in plan.