How to withdraw your VPF to buy a home or repay loan

EPF and VPF do not exist in silos and the rules for withdrawal are the same for both

- Aprajita Sharma

Mr. A is a risk-averse investor who prefers fixed over market-linked returns. He contributes 12% of his basic salary to the employee provident fund (EPF). The concept of voluntary contribution over and above 12% of basic pay, known as the voluntary provident fund (VPF), appealed to him as it earns the same interest as the EPF. He started investing a good amount of surplus in it in 2019. He was told he could withdraw the VPF anytime after a five-year lock-in period. Fast-forward to 2025, and he needed to withdraw funds to purchase a flat. To his surprise, there was no separate VPF accounting in his account. He could only see his EPF balance, and withdrawals, too, had limitations.

"It is a misconception that the VPF and the EPF exist in silos. Any contribution above the statutory PF amount (12% of basic pay) is the VPF. In the case of employees of exempt employers, it gets accounted for separately in the fiscal year of contribution. Still, when the closing balance is carried over to the next fiscal year, the VPF is clubbed and reflects as a single entry as employees' contributions," said Adarsh Vir Singh, founder of social security consultant Nidhi Niyojan.

"In non-exempt cases, employers maintain a separate record of the EPF and the VPF at their end. The passbook mentions employee contribution (EPF+VPF) as a single entry, employer contribution, interest credit and TDS, if applicable," he added.

From the fiscal year 2021-22 onwards, the Employees' Provident Fund Organisation (EPFO) has been deducting tax at source (TDS) on interest income at 10% if the annual contribution to the EPF+VPF is above 2.5 lakh and the interest is more than 15,000, said Sanjay Kesari, regional provident fund commissioner-I (retired), EPFO.