For the financial year 2021-22, the government has announced that the interest on Employees’ Provident Fund starts at 8.1%. This is excellent news for us since we can benefit from it by investing in VPF. VPF is an extension of EPF. And the best part about VPF is it is tax-free. But there are certain guidelines you need to know before investing in VPF. Let me give you some brief insight about Is VPF taxable.
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To understand ‘is interest on VPF taxable’, you need to know if EPF is taxable.
In April 2021, it was announced that if an employee’s contribution to EPF and VPF exceeded Rs. 2.5 lakh in a financial year, then the interest earned on the contribution will become taxable depending on the individual.
Now that we know the answer to the question ‘Is VPF contribution taxable’, let us learn how to invest via VPF and keep both EPF and VPF tax-free.
To ensure that the interest earned on EPF and VPF is tax-free, you need to make sure that both contributions don't exceed Rs 2.5 lakh in a financial year.
Another point to focus on is the EPF contributions that a salaried employee makes every month. There are two ways you can find out about your EPF contributions:
Check your salary slip.
Calculate 12 percent of your basic salary to know your EPF contributions as a salaried employee.
After knowing you can deduct the amount from 2.5 lakh. The amount remaining will be VPF contribution.
Is VPF taxable on retirement:
Under Section 80C, Employees are eligible to claim tax exemption up to Rs. 1.5 lakh by investing in VPF. The interest earned on this contribution is also exempted from tax. But if the interest rate is 9.50% per annum, you will have to pay taxes.
This was all about ‘Is VPF taxable?’ I hope you like it.
Read more:
What is the Maximum Limit for VPF Contribution? What Is The Difference Between PPF and VPF? How To Check VPF Balance?
Is VPF taxable?
Anamika
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2022-08-31T23:41:49+00:00 2022-09-01T00:55:42+00:00Comment
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