Beginner guide · 6-minute read
EPF and VPF, explained simply
EPF (Employees' Provident Fund) is a retirement savings account most salaried people in India get through their job. Every month 12% of your basic pay goes in from your salary, your employer adds about the same, and the money earns interest that's declared each year. VPF lets you put in more.
Checked on 15 Oct 2026 against EPFO's rate declarations and its wage-ceiling FAQs (Sep 2026).
In one minute
- Who runs it
- EPFO (Employees' Provident Fund Organisation), a statutory body under the Ministry of Labour.
- What it pays
- 8.25% for 2025-26. EPFO declares a new rate every year.
- How much goes in
- 12% of your basic + DA from you, and 12% from your employer, part of which goes to a pension (EPS).
- How long
- Until you retire or leave work. You can take out part of it for set needs before that.
How it works, with real numbers
Say your basic + DA is ₹30,000 a month and grows 5% a year. You put in ₹3,600 a month, and your employer adds ₹1,518 to your PF plus ₹2,083 to your pension.
After 25 years at 8.25%, your PF would be about ₹87,09,652: ₹20,61,811 from you, ₹14,37,061 from your employer, and ₹52,10,780 of interest. Interest is worked out on each month's balance and added once a year, on 31 March; the next year, it earns interest too.
Putting an extra 10% of basic + DA into VPF would take that to about ₹1,31,58,113. VPF earns the same rate, but your employer doesn't match it.
How the EPF rate has changed
EPF's latest rate is 8.25%, for 2025-26, the same since 2023-24. Since 2015-16, it has ranged from 8.1% (2021-22) to 8.8% (2015-16).
- EPFO declares each year's rate after the year ends, and it's credited on your whole balance. So over the years you earn whatever the line shows, not just today's 8.25%.
See every rate change (8)
| Period | Rate a year |
|---|---|
| 2023-24 to 2025-26 | 8.25% |
| 2022-23 | 8.15% |
| 2021-22 | 8.1% |
| 2019-20 to 2020-21 | 8.5% |
| 2018-19 | 8.65% |
| 2017-18 | 8.55% |
| 2016-17 | 8.65% |
| 2015-16 | 8.8% |
Pros and cons
Good things
- Your employer adds money. Their share is money you wouldn't otherwise get.
- A steady rate. 8.25% for 2025-26, more than most bank FDs.
- Tax-free. Withdrawals after 5 years of service are tax-free, and so is the interest within the limits.
- Automatic. It comes out of your salary, so you save without having to remember.
- Lowers your tax (old regime). Your own contributions count towards the ₹1.5 lakh deduction.
Things to watch
- Mostly locked. You can take out part of it for set needs; the rest waits until you leave work or retire.
- The rate changes every year. It's declared after each year ends. Since 2015-16 it has ranged from 8.1% to 8.8%.
- Tax on large contributions. Interest on your own contributions above ₹2.5 lakh a year is taxed every year.
- Early withdrawal can be taxed. Taking the money out before 5 years of continuous service can make it taxable.
- Only through a job. You can't open an EPF account on your own.
Is it right for you?
Mistakes to avoid
- Withdrawing when you change jobs. Transfer the balance to your new employer's account instead. It keeps earning, and your years of service carry on.
- Never checking your passbook. Make sure each month's money shows up; employers sometimes deposit late.
- Putting too much into VPF. Interest on your own money above ₹2.5 lakh a year is taxed, and VPF money is hard to take out early.
How to start
- Your employer enrols you and gives you a UAN (Universal Account Number).
- Activate your UAN on the EPFO member portal and link your Aadhaar, PAN and bank account.
- For VPF, tell your HR or payroll team how much extra to deduct each month.
- Check your passbook online every few months.
Words you'll see
- Basic + DA
- Basic pay plus dearness allowance: the part of your salary PF is worked out on.
- UAN
- Universal Account Number: your PF number for life, across jobs.
- EPS
- Employees' Pension Scheme. Part of your employer's share goes here and, after 10 years of service, pays a monthly pension from 58.
- Wage ceiling
- ₹25,000 a month from 17 Sep 2026 (it was ₹15,000). Above it, PF on the full wage is optional.
- VPF
- Voluntary Provident Fund: extra money you choose to put into your PF from your salary.
- Passbook
- Your PF statement, showing each month's money and each year's interest.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.