VPF Calculator: Apart from PF, deposit only ₹ 5,000 extra every month, a guaranteed fund of more than ₹ 30 lakh will be ready in 20 years; understand the complete mathematics

Every month, 12% of basic salary and DA is compulsorily deducted from the salary of salaried employees in the Employees Provident Fund (EPF) account, and the same amount is also deposited by the employer (company). But if an employee wishes to deposit more than this mandatory 12% in his provident fund account for retirement, he has Voluntary Provident Fund (VPF) Is an excellent option.

Under VPF, you can voluntarily contribute up to 100% of your basic salary and DA to your PF account. This does not require opening a new account; It is directly linked to your existing Universal Account Number (UAN) and EPF account. The most important thing is that on this also the same as announced by EPFO 8.25% per annum Gets official and guaranteed interest of Rs. 500, which is much higher than any bank FD, RD or PPF (7.1%).

If you just put an additional savings of ₹5,000 into VPF every month over and above the normal EPF deduction from your regular salary, the complete calculation for 20 years at the current interest rate of 8.25% is as follows:

• Monthly Additional Savings: ₹5,000 per month

• Annual Additional Savings: ₹60,000 per year

• Total principal deposited from your pocket in 20 years: ₹5,000 $\times$ 12 $\times$ 20 = ₹12,00,000 (12 lakh rupees)

• Total compound interest earned in 20 years: ₹19,77,064 (approximately ₹19.77 lakh)

• Total additional retirement fund after 20 years: ₹12,00,000 + ₹19,77,064 = ₹31,77,064 (approximately ₹31.77 lakh)

This means that with a small monthly habit of just Rs 5,000, your principal amount will be Rs 12 lakh in 20 years, but due to the miracle of compounding, an additional Rs 19.77 lakh will be added to the total fund as interest. ₹31.77 lakh Will be ready.

If you deposit ₹5,000 per month in VPF for different time periods, the growth of the fund will be as follows:

(Note: This calculation has been done based on a fixed interest rate of 8.25% and compounded monthly. EPFO ​​reviews the interest rate every financial year.)

As per income tax rules, the tax exemption available in VPF is quite attractive, but there is an important limitation in it:

1. Exemption under Section 80C: In the old tax regime, contributions made to VPF are eligible for tax exemption under the annual limit of ₹ 1.5 lakh under Section 80C.

2. ₹2.5 lakh annual interest limit (Tax on Interest): As per Central Board of Direct Taxes (CBDT) rules, if the employee’s total PF contribution (comprising mandatory EPF + voluntary VPF) in a financial year is ₹2,50,000 (Rs 2.5 lakh) exceeds ₹ 2.5 lakh, then the interest earned on the additional deposit amount above ₹ 2.5 lakh is taxable. If you deposit ₹5,000 every month (₹60,000 annually) and your normal EPF is less than ₹1.9 lakh, your entire interest will be 100% tax-free.

3. Withdrawal Tax-Free after 5 years of service: If you withdraw VPF or EPF money after completing 5 years of continuous service, there is no income tax on both the principal and interest.

Starting VPF is very easy and does not require visiting any government office:

1. Contact HR/Finance department of the company: Ask for VPF form from your employer (HR or payroll team).

2. Decide Contribution Amount: Mention in the form how much fixed amount (say ₹ 5,000) or what percentage additional you want to be deducted from your basic salary and DA per month.

3. Changes in the beginning of the financial year: Most companies accept VPF requests at the beginning of the financial year (April) or in the half yearly cycle.

4. Tracking in Salary Slip and Passbook: As soon as the application is approved, a separate deduction of VPF will start appearing in your monthly salary slip and this amount will be automatically added to your PF balance on EPFO’s UMANG App or Member Passbook portal.