The VPF comes under the EEE (Exempt-Exempt-Exempt) tax category, meaning that the principal amount, the interest earned, and the maturity amount are all exempt from tax under Section 80C of the Income Tax Act. However, if the funds are withdrawn before five continuous years of service, the withdrawn amount becomes taxable. Further, if the withdrawn amount exceeds Rs. 50,000 before the completion of five years of service, a TDS (Tax Deducted at Source) is applicable at 10% if the PAN is furnished or 34.608% if the PAN is not furnished.