VPF Interest Rate

VPF Interest Rates (2005–2025) 

The interest rate on VPF is revised annually by the Employees’ Provident Fund Organisation (EPFO). Given below is a table showing VPF interest rates declared over the past 20 financial years. 

VPF Interest Rates & other facts

1. In companies and enterprises that has more than 20 staffs, 12% of the gross salary is deducted monthly towards the Employee Provident Fund (EPF). Same amount will be reduced for VPF as well.
2. The VPF can be considered as the extra contribution made to your EPF over the compulsory 12%. But unlike how it is for EPF, the employer will not contribute towards VPF.
3. The rate of interest offered for your VPF will be the same as that for your EPF, which is 8.25% as per the current financial year.
4. Interest rates on VPF schemes are reviewed by the government annually. VPFs also enjoy special tax benefits as specified in the Section 80C of the Indian Tax Act. And the interest earned this way is free from taxation.
5. Income from Earned Interest: You cannot be taxed on the interest accumulated unless the interest rate goes beyond the legal rate of 8.25% as of now.
6. If the cash is taken out within the initial five years of service, then interest income can be taxed. So think well before you opt for this scheme as part of your regular financial planning.
7. Interest income will be taxed if it escalates above 8.50%.
8. Please keep in mind that VPFs are long-standing savings and administered by the same set of VPF guidelines that are applicable to other provident fund schemes.
9. Earnings after maturity from VPF are exempted from tax given that you continue in service for more than five years. If you leave your job quit before five years and requires the maturity amount, it would be taxed.
10. If needed, you can apply for a loan against the funds assimilated in the account for any personal reasons such as wedding or purchasing a home or car etc.
11. VPF is highly recommended for those in the top tax bracket.
12. VPF is also considered as a good tool against inflation.
    

Method for Calculating VPF Interest 

Interest on a Voluntary Provident Fund (VPF) is calculated on monthly basis by using the opening balance of each month. This balance includes: 

1. The employee’s contribution to the EPF 

1. The employer’s contribution to the EPF 

1. Any additional contribution made by the employee under VPF
   
   

Formula for Calculating Interest 

The formula for calculation interest is: Monthly Interest = (Annual Interest Rate / 1200) × Opening Balance.  

In order to calculate the monthly interest rate, the annual VPF interest rate will be divided by 1200 and then it will be multiplied by the opening balance for the month. Here is an example given below for better understanding. 

Example:  

1. Monthly salary of employee: Rs.40,000  

1. Employee’s EPF contribution as per EPFO guidelines - 12% of Rs.40,000 (Rs.4,800) 

1. Employer’s additional VPF contribution – 10% of Rs.40,000 (Rs.4,000) 

1. Employer Contribution- 3.67% of Rs.20,000 (Rs.734) 

1. Total Monthly Contribution: Rs.4,800 + Rs.4,000 + Rs.734 = Rs.9,534 

1. Annual Interest Rate for the year 2024- 8.25%  

1. Monthly Interest Rate- 8.25 / 1200 = 0.6875% 

Note: The opening balance for the starting month will be zero.

Here is the data for an employee working in a company. Assuming that the joining date of employee was 1 July 2024. Given below is the table showing the VPF interest rate of six months for an employee.