EPF vs VPF: Rs 25,000 basic salary, how much extra amount can you generate through Voluntary Provident Fund?

The Employees Provident Fund (EPF) and Voluntary Provident Fund (VPF) are savings tools that help salaried individuals build a retirement fund with interest. Although they serve a similar purpose, they have distinct features. Let’s explore the differences between EPF and VPF to understand them better. Also, let’s find out how much extra amount you can generate through VPF with a Rs 25,000 basic salary.

What is Employees Provident Fund (EPF)?

The Employees Provident Fund (EPF) is a retirement savings plan managed by the EPFO (Employees’ Provident Fund Organisation). Both employees and employers contribute to it. The employee contributes 12 per cent of their basic salary, and the employer matches this amount. A portion of the employer’s contribution goes to the Employee Pension Scheme, while the rest goes to the EPF account, helping employees save for retirement.

What is Voluntary Provident Fund (VPF)?

The Voluntary Provident Fund (VPF) is an extension of EPF that allows employees to save more for retirement. Contrary to EPF, employees can contribute up to 100 per cent of their basic salary and dearness allowance to VPF, and employers don’t contribute to this scheme. It is a way for employees to voluntarily save more for their future. 

VPF vs EPF: What is the difference?

The main differences between VPF and EPF lie in their tax implications, participation requirements, contributors, and contribution limits. For tax purposes, contributions above Rs 2.5 lakh in EPF or VPF are taxable on the interest earned. 

While EPF participation is mandatory, VPF is voluntary, allowing employees to save more for retirement. EPF involves contributions from both employees and employers, whereas VPF is solely funded by employees. Additionally, EPF has a 12 per cent contribution limit, whereas VPF allows contributions of up to 100 per cent of basic salary and dearness allowance.

EPF Calculation Conditions

• Monthly Salary (Basic + DA): Rs 25,000
• Employee Contribution to EPF: 12 per cent
• Current Age: 25 years
• Expected Annual Salary Increase: 5 per cent

EPF: What will you get on Rs 25,000 basic salary

• Total Investment: Rs 45,05,360
• Total Interest: Rs 1,35,99,128
• Accumulated Maturity Corpus: Rs 1,81,04,488 at retirement

VPF Contribution Example

• Monthly Salary (Basic + DA): Rs 25,000
• Employee Contribution to EPF: 20 per cent
• Current Age: 25 years
• Expected Annual Salary Increase: 5 per cent

VPF: What you may get on Rs 25,000 basic salary

• Total Investment: Rs 68,05,474
• Total Interest: Rs. 2,05,41,873
• Accumulated Maturity Corpus: Rs 2,73,47,347 at retirement