How to grow your retirement corpus with Voluntary Provident Fund (VPF)

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VPF is just extra money you choose to put into your existing EPF account. If you are a salaried employee covered by EPFO, you already pay 12 percent of your basic pay plus dearness allowance to EPF. With VPF, you can add more—up to 100 percent of basic + DA—through your company’s payroll. This extra amount earns the same interest as EPF.

Why it’s attractive now

For FY 2024–25 (and notified again for FY 2025-26), EPF pays 8.25 percent a year. VPF gets that same rate because it sits inside EPF. That’s higher than many bank FDs. It’s also backed by EPFO, so the risk is low. Because the money is deducted from salary, it’s an easy way to save regularly.

Key benefits and tax treatment

Your VPF contribution can be claimed under Section 80C (within the Rs 1.5 lakh overall limit). Interest is tax-free if your total own EPF + VPF contribution in a year is up to Rs 2.5 lakh. For government employees where the employer does not contribute to the PF account, the tax-free threshold is higher (at Rs 5 lakh). If you put in more than that, the interest on the extra portion may be taxable. At retirement (or after five years of continuous service), withdrawals are tax-free. The balance moves with you when you change jobs.

Who should consider it

Pick VPF if you earn a salary, already have EPF, and can spare some income every month for long-term goals. It suits people who want steady growth with low risk and don’t need frequent access to this money. If you expect to need cash soon, keep some savings outside VPF.

How to invest and the basic rules

Tell your HR or payroll team how much extra you want to contribute above the mandatory 12 percent. They will deduct it every month and credit it to your EPF account—there is no separate VPF account. You can go up to 100 percent of basic + DA, but make sure your take-home pay still covers your expenses. Remember, the EPF/VPF interest rate is set each year and can change in the future.

Practical considerations

VPF is great for building retirement savings, but it isn’t very liquid. If big expenses are coming up, don’t over-commit. Also watch the Rs 2.5 lakh annual cap for your own EPF + VPF contributions, because interest above that limit can be taxed. Employers don’t match VPF—matching applies only to the standard EPF part.

Bottom line

If you want a simple, low-risk way to grow your retirement corpus, VPF is hard to beat. With the current 8.25 percent rate and strong tax benefits, it can meaningfully boost long-term savings—provided you can lock the money in and don’t mind less flexibility.