VPF (Voluntary Provident Fund): The Hidden Gem of 8.25% Returns

The Best Investment You Never Heard Of

If I told you there is an investment that offers:

1. •Safety: Highest possible (Sovereign Guarantee).
2. •Returns: 8.25% (Better than FD/Debt Funds).
3. •Tax: Exempt-Exempt-Exempt (Mostly).
4. •Cost: Zero.

You would ask: "Where do I buy it?" The answer is: Ask your HR. it is called VPF (Voluntary Provident Fund).

Why is it "Hidden"?

Financial products in India are sold, not bought. Agents sell LIC policies because they get 30% commission. Agents sell Regular Mutual Funds for 1% commission. VPF pays 0% commission. So, nobody sells it. You have to buy it yourself.

Chapter 1: VPF vs PPF (The Battle of Sovereigns)

Both are government-backed. Both are safe. But VPF is the clear winner for salaried employees.

The Math: On a ₹1 Lakh investment over 20 years:

• •PPF (7.1%): Becomes ₹3.9 Lakhs.
• •VPF (8.25%): Becomes ₹4.8 Lakhs.
• •Difference: You lose nearly ₹1 Lakh by choosing PPF.

Chapter 2: The Tax Rules (Crucial)

Until 2021, VPF was heaven. Unlimited tax-free interest. The Govt realized High Net-Worth Individuals (HNIs) were putting Crores in VPF. So they introduced a cap.

The Rule: Interest on employee contribution up to ₹2.5 Lakh per year is Tax-Free. Interest on contribution above ₹2.5 Lakh is taxable at your slab rate.

Strategy:

1. •Check your mandatory EPF contribution (12% of Basic). Say it is ₹1 Lakh.
2. •You have room for ₹1.5 Lakh more in VPF to stay tax-free.
3. •Invest that ₹1.5 Lakh in VPF.
4. •Anything above that? Calculate if 8.25% Taxable is better than FD. (Spoiler: It usually is).

Chapter 3: How to Start VPF?

It is surprisingly manual.

1. •Contact your Company HR / Payroll team.
2. •Ask for a "VPF Declaration Form".
3. •Specify the amount (e.g., ₹5,000/month or 10% of Basic).
4. •They will deduct it from your salary slip next month.
5. •It goes into the same UAN account as your EPF. You can track it in the EPF Passbook.

Chapter 4: Liquidity Concerns

"But money is locked till retirement!" Not exactly.

• •Job Loss: Withdrawal allowed after 2 months of unemployment.
• •Marriage/Education/House: Partial withdrawals allowed after 5 years service.
• •Retirement: Full corpus tax-free.

Conclusion: VPF is the boring, unsexy, "Hidden Gem" of Indian finance. It doesn't have an app. It doesn't have ads. But for the Fixed Income part of your portfolio, it has no competition. Max it out before you look at Debt Funds.