Tax Free Retirement Fund: Salaried people can create a tax free retirement fund of up to Rs 4.5 crore, know how

Tax Free Retirement Fund: Through VPF i.e. Voluntary Provident Fund, employed people can create a tax free retirement fund of up to Rs. 4.5 crore without any risk. Know how?

Tax Free Retirement Fund: Every working person wants to have a large fund at the time of retirement, so that not only his future is secure, but he can also meet the major expenses of life without any stress. Now the question is how to create such a fund through safe investment while staying away from the fluctuations of the market? The answer to this is – VPF (Voluntary Provident Fund).

Software engineer Suman’s story shows the way to millions of such youth, who want to do strong financial planning at the beginning of their career. She has decided that she will choose a risk-free, tax-free and high-return option for retirement. VPF has emerged as a great option for her.

What is VPF and why is it better?

  • Voluntary Provident Fund (VPF) is an extension of EPF.
  • Contribution of 12% of basic salary is mandatory in EPF.
  • You can contribute up to 100% of Basic + DA in VPF as per your wish.
  • This is a completely government supported and safe scheme.
  • The same interest rate is available on VPF as is available on EPF. Currently, 8.25% interest rate is being offered.

Suman’s PF + VPF calculation

Suman is 28 years old. Suman’s basic salary and DA combined is ₹35,000. She wants to create a big fund by the time she retires. Since the investment in both EPF and VPF exceeds 2.5 lakhs, the interest received will be taxable. In such a situation, Suman has set a target of investing ₹20,833 monthly and ₹2,50,000 annually.

Contribution monthly Annual
Employment Exchange (12%) ₹4,200 ₹50,400
VPF (up to tax free limit) ₹16,633 ₹1,99,600
total investment  ₹20,833 ₹2,50,000

 

On this investment of EPF and VPF, Suman will get a retirement fund of more than ₹4 crore (estimated in 32 years, as per compounding at 8.25% interest rate). Along with this, he will also get tax benefits (under 80C).

Benefits of VPF

  • Avoid the risk of stock market.
  • Higher interest than bank FD.
  • Tax savings under 80C.
  • Automatic tracking with EPF.
  • Fund growth in the long term due to compounding.

Note

  • VPF cannot be closed in the middle of the financial year.
  • Interest on withdrawal before 5 years will be taxable.
  • Interest on annual contribution of more than ₹2.5 lakh in EPF+VPF will be taxable.

Conclusion

If you too want a safe and high-return retirement fund like Suman, then do not ignore VPF. This scheme is a great way to get into the habit of investing at the beginning of your job, save tax and strengthen your future.

The post Tax Free Retirement Fund: Salaried people can create a tax free retirement fund of up to Rs 4.5 crore, know how first appeared on informalnewz.

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