HR & payroll glossary
What is VPF? Voluntary Provident Fund
VPF is an extra PF contribution an employee chooses above the mandatory 12%, credited to their EPF account at the EPF interest rate with no employer match.
Definition
The Voluntary Provident Fund lets an employee put more than the mandatory 12% of PF wages into their EPF account. The employer deducts the extra amount from salary and remits it with the regular PF; the employer is not required to match it.
How it works
- The employee chooses a percentage or amount above 12%, up to 100% of basic plus DA.
- It earns the same interest as EPF and follows the same withdrawal rules.
- Interest on an employee's own contributions above the limit set in the Income-tax Act is taxable.
- The choice is usually made once for the year and changed through HR.
Why HR and payroll teams care
VPF reduces take-home pay and must be shown separately on the payslip and in the ECR. Employees often ask HR to stop or change it mid-year.
Example
Basic of ₹40,000 with VPF of 8%
- Mandatory employee PF: 12% × ₹40,000 = ₹4,800
- VPF: 8% × ₹40,000 = ₹3,200
- Total employee deduction: ₹8,000 a month
- Employer share: unchanged
VPF in NeevHR
Related reading
See how NeevHR handles VPF in payroll and HR
A walkthrough on your own policies and pay structures.