VPF vs EPF: How you can double your Rs 2.45 crore retirement corpus by investing extra through Voluntary Provident Fund
VPF vs EPF: Are you contributing the standard 12 per cent of your basic salary to your EPF but looking to boost your retirement corpus? If so, it’s time to explore the Voluntary Provident Fund (VPF). By increasing your monthly investment, you can significantly enhance your savings over 35 years, benefiting from an attractive interest rate of 8.25%. Know how to optimize your retirement savings strategy and potentially double your existing corpus with smart investing—
VPF vs EPF: Every month, 12 per cent of the basic salary and dearness allowance (DA) of employees in the private sector is deposited into their Employees' Provident Fund (EPF) account, with the same amount matched by the employer. EPF contributions earn a competitive interest rate, currently set at 8.25 per cent. This long-term savings strategy effectively builds a substantial retirement fund. However, employees often wonder if they can contribute more than the mandatory 12 per cent. Here’s how you can double your retirement corpus by investing extra through VPF or Voluntary Provident Fund.
What is VPF?
If you wish to contribute more than 12 per cent to your EPF, consider the Voluntary Provident Fund (VPF). With VPF, there’s no cap on salary deductions; employees can contribute up to 100 per cent of their basic salary. The government offers the same interest rate on VPF as on EPF, allowing you to amass a significant amount through VPF with excellent returns.
EPF vs VPF: How you can double your Rs 2.45 crore retirement corpus by investing extra
By investing an additional amount each month, beyond the mandatory 12 per cent contribution to the EPF, one can significantly enhance his/her total retirement corpus. Know how with calculation -
EPF: How to build a Rs 2.45 crore retirement corpus?
Suppose you are 25 years old and start contributing Rs 10,000 every month in your EPF account, then after 35 years, your total investment will be Rs 42,00,000. With an interest rate of 8.25%, your estimated return will be approximately Rs 2,03,63,234. When you add your invested amount to the estimated return, your total retirement corpus will be around Rs 2,45,63,234.
EPF: How to build a Rs 2.45 crore retirement corpus?
With an interest rate of 8.25%, your estimated return will be approximately Rs 2,03,63,234. When you add your invested amount to the estimated return, your total retirement corpus will be around Rs 2,45,63,234.
VPF: How to build a Rs 4.91 crore retirement corpus?
If you increase your monthly contribution to Rs 20,000 (an additional Rs 10,000), after 35 years, your total investment will amount to Rs 84,00,000. With an interest rate of 8.25 per cent, your estimated return will be approximately Rs 4,07,26,468.
VPF: How to build a Rs 4.91 crore retirement corpus?
When you add your invested amount to the estimated return, your total retirement corpus will be around Rs 4,91,26,468. Hence, this strategy allows you to effectively double your Rs 2.45 crore retirement corpus by making this extra investment.
Benefits of VPF - 1. Guaranteed Returns
As a government-backed scheme, VPF provides guaranteed returns. With an interest rate of 8.25 per cent, VPF outperforms bank fixed deposits, Public Provident Fund (PPF), and other government schemes. Increasing your PF contributions can significantly enhance your retirement savings.
Benefits of VPF - Tax Benefits
The interest earned and the amount withdrawn from VPF are tax-free, qualifying it as an Exempt-Exempt-Exempt (EEE) investment. Under Section 80C of the Income Tax Act, you can claim a tax exemption of up to Rs 1.5 lakh in a financial year.
Benefits of VPF - Transferability
Like EPF, VPF accounts can also be transferred. However, once you opt for VPF, you must contribute for a minimum of 5 years.
Benefits of VPF - Lock-In Period
VPF has a lock-in period of 5 years. Withdrawals made after this period are tax-free. If you withdraw before completing 5 years, the amount will be subject to tax based on your applicable tax slab.