GUIDES
GuidesPersonal FinanceA Guide: Voluntary Provident Fund (VPF): Interest Rate, Enrollment, Eligibility, Withdrawal
LAST EDITED BY RUPALI AMIN ON APRIL 24, 2025.
Most financial experts believe it's never too early to start retirement planning. Thankfully, India has different government-backed low-risk retirement plans and schemes, including compulsory and optional provident funds. While EPF is a compulsory scheme for eligible employees, VPF is an optional one.
Unlike EPF or Employee’s Provident Fund, where salaried employees working in eligible organisations contribute at least 12% of their basic salary to a retirement fund and their employers contribute a matching amount, VPF is different.
The VPF full form is Voluntary Provident Fund. While an extension of the EPF scheme, VPF includes only voluntary contributions from the employee. In other words, employees can voluntarily deposit extra funds over and above their mandatory EPF limits into their VPF account.
To enrol for VPF, you must meet the following eligibility criteria:
Much like EPF, VPF interest rates are also determined and notified by the Indian government. As of 2022-23, the VPF interest rate is 8.15% p.a. You can use a VPF calculator to estimate returns for the current fiscal year.
Here’s an overview of VPF interest rates over the last five years:
Enrolling for VPF is pretty straightforward. Here’s a step-by-step guide to help you:
Submit a written request to your company’s HR team, notifying them of your VPF request.
Next, fill out the VPF application form with your personal details.
Outline the amount you wish to contribute each month towards VPF. This amount will be deducted from your monthly basic salary and dearness allowance.
You can enrol for VPF at any time of the financial year. However, you cannot discontinue VPF contributions during an ongoing financial year. Also, your VPF contribution cannot exceed 100% of your basic salary and dearness allowance limits.
VPF allows for whole/partial withdrawals of funds after the 5-year lock-in period, post submission of Form 31 to the employer. During this lock-in period, you can also make partial/complete withdrawals from the VPF account. However, doing so will attract taxes on the withdrawn sum.
Moreover, this liquidity benefit is applicable only under the following circumstances:
VPF is a low-risk investment avenue, perfect for salaried investors looking to grow their corpus over time while hedging risks and tax liabilities. VPF is best suited for those approaching retirement age since it offers fixed interest accruals and stable returns for the approaching golden years. For a well-balanced retirement portfolio, you can estimate your returns using a VPF calculator and restructure your investments accordingly.
While EPF and VPF can help you make the most out of your salary, so can a good salary program. Fi, and its licensed partner Federal Bank, provide a Salary Program with many benefits .
The current rate of interest for VPF (2023-24) stands at 8.15% p.a., which is higher than other fixed-income generating investment avenues like PPF and fixed deposits.
Only salaried employees already enrolled in the EPF scheme can opt for VPF. People employed in the unorganised sector cannot opt for VPF.
For VPF, the employee has to convey a desire to the company’s HR for additional contributions over and above their EPF contribution.
VPF comes with a 5-year lock-in window. If you withdraw (whole/partial) funds before the end of this period, the amount will be subject to taxes as per VPF rules. Moreover, you can only withdraw funds under certain circumstances, like loan payments or medical expenses.
As a government-backed scheme, VPF adds safety to your retirement savings and financial planning. This low-risk investment option brings you competitive returns, tax benefits, and the freedom to decide on your contribution limits.
