Anushka Rathod's Guide to Maximizing Tax Savings with VPF Before March 31st

As March 31st approaches, it's crucial to strategize your taxes to maximize savings. Anushka Rathod, a renowned finance content creator, highlights the importance of planning your 80C investments and recommends the Voluntary Provident Fund (VPF) as a lucrative option for salaried individuals. Let's delve into the details of VPF and understand why it's a wise choice for tax-saving investments.

Understanding VPF: A High-Return, Low-Risk Option

VPF, or Voluntary Provident Fund, is an extension of the Employee Provident Fund (EPF), allowing salaried employees to voluntarily contribute beyond the mandatory EPF contributions. It's an appealing scheme for those looking to enhance their retirement savings while enjoying tax benefits.

Key Features of VPF:

• Riskometer: Low risk, making it a safe investment option.
• Eligibility: Available to salaried employees with an existing EPF account.
• Liquidity with Limits: Though there's a 5-year lock-in period, partial withdrawals are allowed during emergencies post-lock-in.
• Interest Rate: Offers an attractive rate of 8.15%, with rates set annually by the government.
• Investment Cap: Contributions can exceed 12%, up to 100% of the basic salary and dearness allowance.
• Tax Perks: VPF enjoys the EEE (Exempt-Exempt-Exempt) status, meaning investments, interest, and maturity amounts are tax-exempt. However, if the combined contribution to EPF and VPF exceeds ₹2.5 lakhs in a financial year, the interest on the excess will be taxed as per your income tax slab.

How to Invest in VPF?

Investing in VPF is straightforward. Simply inform your employer of your desire to increase your EPF contribution through a registration form. Your employer will then deduct the specified amount from your salary and deposit it into your VPF account.

Tax Savings Potential

By investing in VPF, you can significantly reduce your taxable income. For instance, if you're in the highest tax slab (30%), you could save up to ₹46,800, assuming your 80C section is fully utilized. However, actual savings will vary based on your tax slab and investment amount.

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As the financial year-end approaches, consider leveraging the Voluntary Provident Fund (VPF) to optimize your tax savings and secure your financial future. With its low-risk profile, attractive interest rates, and tax benefits, VPF is an excellent addition to your investment portfolio. Remember to consult your Chartered Accountant (CA) for personalized tax advice and ensure you make informed decisions about your investments.