EPF vs VPF: At Rs 21,000 starting basic salary what will be your retirement corpus at 12% & 14% monthly contribution
Compare EPF and VPF to maximise your retirement savings. Learn the features, tax benefits, and potential returns of each scheme with different contribution rates to make the best financial decision
Understanding the differences between EPF (Employee Provident Fund) and VPF (Voluntary Provident Fund) can help maximise retirement savings. Both schemes are designed to build a secure financial future for salaried employees, but they offer unique benefits and contribution options. EPF is a mandatory contribution-based scheme with matched employer deposits, while VPF allows employees to make additional voluntary contributions, increasing their savings. This guide compares EPF and VPF, covering features, tax benefits, and projected returns based on different contribution rates
What is EPF?
EPF (Employee Provident Fund) is a contribution-based retirement savings scheme for salaried individuals, managed by the Employee Provident Fund Organisation (EPFO).
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Mandatory for Employees: EPF is mandatory for employees earning less than Rs. 15,000 per month.
Mandatory for Employees
EPF is mandatory for employees earning less than Rs. 15,000 per month.
Features of EPF
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Employee Contribution: 12% of the monthly salary.
- Employer Contribution: Employer matches the employee’s contribution, also contributing 12%.
- Applicability: Required for companies with 20 or more employees.
- Retirement Benefit: Helps employees build a retirement corpus.
- Tax Benefits: Deduction under Section 80C of the Income Tax Act, 1961.
- Partial Withdrawals: Available during emergencies.
- Social Security: Provides financial security, especially for low-income individuals.
Employee Contribution: 12% of the monthly salary.
What is VPF?
VPF (Voluntary Provident Fund) is a voluntary retirement savings scheme where employees contribute an additional amount over their EPF contributions.
Employer Contribution
The employer does not contribute to VPF.
Features of VPF
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Interest Rate: VPF offers an interest rate of 8.1% per annum, equal to EPF.
- Tax Benefits: Contributions are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.
- Contributions: Made over and above the mandatory EPF contribution.
- Lock-in Period: Same as EPF.
- Fund Transfer: VPF funds are transferred along with EPF during job switches.
- Fund Withdrawal: Allowed after 2 months of unemployment or upon retirement.
- Opening a VPF Account: Requires informing your employer to make contributions.
Interest Rate: VPF offers an interest rate of 8.1% per annum, equal to EPF.
EPF vs VPF: Projected Returns
EPF Contribution Example
- Monthly Salary (Basic + DA): Rs. 21,000
- Employee Contribution to EPF: 12%
- Current Age: 25 years
- Expected Annual Salary Increase: 5%
Projected Maturity Details
- Total Investment: Rs. 37,84,526
- Total Interest: Rs. 1,14,23,549
- Accumulated Maturity Corpus: Rs. 1,52,08,075 at retirement
VPF Contribution Example
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Monthly Salary (Basic + DA): Rs. 21,000
- Employee Contribution to EPF: 14%
- Current Age: 25 years
- Expected Annual Salary Increase: 5%
Monthly Salary (Basic + DA): Rs. 21,000
Projected Maturity Details:
- Total Investment: Rs. 42,67,554
- Total Interest: Rs. 1,28,81,552
- Accumulated Maturity Corpus: Rs. 1,71,49,106 at retirement
Key Takeaways:
Key Takeaways:
- Both EPF and VPF provide tax benefits and help build a secure retirement corpus.
- VPF allows for higher contributions, leading to a larger retirement fund compared to EPF, resulting in higher returns.
Key Takeaways:
- Both EPF and VPF provide tax benefits and help build a secure retirement corpus.
- VPF allows for higher contributions, leading to a larger retirement fund compared to EPF, resulting in higher returns.