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EPF Vs VPF, Know Which One To Choose For Higher Interest Returns

The EPF and VPF are good for retirement savings but you should be aware of the interest rate being provided by these two types of saving schemes. So, let's read the details given below.

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

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

What is EPF?

The EPF, managed by the Employees' Provident Fund Organisation (EPFO), is designed to provide financial support to salaried individuals in their retirement years. Employees contribute 12 per cent of their basic pay and dearness allowance to this scheme, with the employer matching this contribution. Of the employer's contribution, 8.33 per cent goes to the Employee Pension Scheme (EPS), while the remaining 3.67 per cent is deposited into the EPF account.

What is VPF?

The VPF serves as an extension of the EPF. In this scheme, employees are not limited to a 12 per cent contribution and can choose to contribute a maximum of 100 per cent of their basic pay and dearness allowance. However, the employer does not make any contributions to this plan.

Which is better EPF or VPF?

In practical terms, the Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) are nearly indistinguishable. The VPF enables additional investments beyond the mandatory EPF contributions. Currently, the interest earned on an employee's contributions to both EPF and VPF is exempted from taxes for amounts up to Rs 2.5 lakh per fiscal year.

Which one Offers a Higher Interest Rate?

Both the EPF and VPF provide an interest rate of 8.15 per cent on contributions. Nevertheless, the VPF has the potential to yield superior returns on your contributions because you can contribute more than the capped 12 per cent of basic pay and dearness allowance allowed in the EPF. Opting for a higher amount in your VPF account can lead to greater returns over time.

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