EPF vs VPF, know which one to choose for higher interest returns.


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EPF and VPF are good for retirement savings but you should be aware of the interest rates offered by these two types of savings schemes. So let’s read the details given below.

EPF or VPF which is best for you (Photo: Krishi Jagran)
EPF or VPF which is best for you (Photo: Krishi Jagran)

EPF and VPF are important tools for retirement savings. While EPF contributions are mandatory, you can choose to voluntarily contribute to a VPF account for additional savings. Both the funds can grow the retirement fund substantially with attractive interest rates. Although their basic purpose is the same, EPF and VPF have distinct features, making it worthwhile to examine their differences closely.

What is EPF?

EPF, managed by the Employees Provident Fund Organization (EPFO), is designed to provide financial support to salaried individuals during their retirement years. Employees contribute 12 percent of their basic salary and dearness allowance to the scheme, with the employer matching the contribution. Of the employer’s contribution, 8.33 percent goes to the Employee Pension Scheme (EPS), while the remaining 3.67 percent is credited to the EPF account.

What is VPF?

VPF works as an extension of EPF. In this scheme, employees are not limited to 12% contribution and can choose to contribute up to 100% of their basic salary and dearness allowance. However, the employer does not contribute to this plan.

Which is better EPF or VPF?

In practice, Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) are almost separate. VPF enables additional investment beyond the mandatory EPF contribution. Currently, interest earned on employee contribution to both EPF and VPF is exempt from tax up to Rs 2.5 lakh per financial year.

Which offers a higher interest rate?

Both EPF and VPF provide an interest rate of 8.15 percent on contributions. Even so, VPF has the potential to earn higher returns on your contribution as you can contribute more than 12 percent of the basic salary and dearness allowance allowed to EPF. Opting for more money in your VPF account can lead to higher returns over time.

First Published: 29 Sep 2023, 15:18 IST

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