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The Narendra Modi government may increased the limit on Voluntary Provident Fund (VPF) contributions under the Employees' Provident Fund Organisation (EPFO) that earn tax-free interest. At present, interest earned on contribution is above Rs 2.5 lakh is taxable.The objective is to encourage lower-middle and middle-income salaried employees and subscribers of EPFO, allowing them to gain a substantial retirement savings. The Ministry of Labour and Employment is investigation the issue and may discuss it with the stake holders and finance ministry during the Financial Year 2026 budget, people familiar with the matter told Economic Times.The voluntary contribution of Rs 2.5 lakh was introduced by EPFO in the Financial Year 2022 budget to prevent high-income employees from using the facility to earn tax-free interest higher than offered by banks or fixed deposits. Previously, high earners used this facility to secure higher tax-free interest compared to bank or fixed deposits, leading the government to step in to curb this advantage. Generally, VPF contributions are fully tax-exempt, meaning the contribution, interest, and maturity amount are all tax-free.Also Read | Ratan Tata Wealth: Late Industrialist Includes Pet Dog Tito in His Rs 10,000-Crore Will to Ensure 'Unlimited' Care.VPF contributions, interest and maturity proceeds are typically exempt from taxation. EPFO has been offering interest rates above 8% since FY78, reaching a peak of 12% in FY90 and maintaining that level for 11 years until FY2000. The interest rates on PF accumulation were 8.10% for FY22, 8.15% for FY23, and 8.25% for FY24.Under the current Employees' Provident Funds & Miscellaneous Provisions Act, there is no limit on VPF contributions to the PF account, which can be up to 100% of basic salary and dearness allowance. EPFO has an average of 70 million monthly subscribers, more than 7.5 million pensioners, and a corpus exceeding Rs 20 lakh crore.

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Voluntary provident fund, Latest News

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