Withdraw from VPF

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Hi,

Are there additional withdrawal rules for VPF or same as EPF?
Also, Which is better for loans EPF or VPF?

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  • Lock-in period

As per Voluntary Provident Fund withdrawal rules, contribution to a VPF account is subject to a maturity period of 5 years. Therefore, an individual cannot withdraw any sum from their Voluntary Provident Fund before the completion of 5 years sans repercussions.

In case a person chooses to withdraw, fully or partially, before the lapse of 5 years, then such amount is subject to taxation as per VPF withdrawal rules.

  • Withdrawal

Ideally, when an individual retires or resigns, the entire accumulated amount in EPF is paid to him/her. Additionally, such funds are also released and disbursed to a nominee when an individual passes away untimely, as per VPF withdrawal rules 2020 .

Furthermore, VPF rules allow for partial withdrawals from a Voluntary Provident Fund in the form of loans. It is also possible to withdraw the entire accumulated corpus as well.

Moreover, an EPF account can be broken under the following circumstances –

  • Payment of loans
  • Marriage
  • Child’s education
  • Medical emergency

However, individuals must note the maturity period if they want to avoid paying taxes on the same.

  • Taxation

The Voluntary Provident Fund is one of the most preferred savings schemes by working individuals due to its advantageous tax implications. The contributions made to an EPF account, including what is accounted as a Voluntary Provident Fund, are exempted from tax calculation under Section 80C of the Income Tax Act, 1961.

Moreover, the accrued interests on the balance as well as the maturity amount are free from wealth taxes. However, to avail such tax benefits on interest and maturity amount, individuals must withdraw the corpus after the completion of 5 years. If an individual withdraws before that, then he/she must pay taxes on the same.

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