EPF and VPF Explained: Interest and Withdrawal
The Employees' Provident Fund (EPF) is a retirement saving scheme linked to your salary. Money goes in every month, earns interest, and is meant to support you after you stop working. To project your own balance, use the EPF Calculator.
Key takeaways
- You contribute 12% of basic + DA, and your employer also pays 12%, but part of the employer share goes to the pension scheme (EPS).
- Interest is worked out on the monthly balance and credited once a year at the rate EPFO declares.
- VPF lets you add more than 12% at the same interest rate.
How much goes in each month
You contribute 12% of your basic salary and dearness allowance. Your employer also pays 12%, but 8.33% of wages up to ₹15,000 (a maximum of ₹1,250) goes to the Employees' Pension Scheme (EPS) and not to your EPF. The rest goes into your EPF account.
Worked example
Basic + DA is ₹30,000 a month.
- Your 12%: ₹3,600.
- Employer 12%: ₹3,600.
- EPS share: 8.33% of wages capped at ₹15,000, so about ₹1,250.
- Employer share into EPF: ₹3,600 − ₹1,250 = ₹2,350.
- Total into EPF each month: ₹3,600 + ₹2,350 = ₹5,950, or ₹71,400 a year.
Your pay slip may show the employer's full 12%, which is why the EPF balance can look smaller than you expect. The EPS portion builds a separate pension entitlement.
How interest works
Interest each month is balance × annual rate ÷ 12, and it is credited once at year end. The EPFO declares the rate every year, so use the latest declared rate in any estimate. Our calculator's default of 8.25% was the declared rate for FY 2024-25 and is not a promise for future years.
Tax treatment
Interest is tax-free on your contributions up to ₹2.5 lakh a year (₹5 lakh if there is no employer contribution). Interest above that is taxable. Withdrawals before five years of service may attract TDS and tax. Rules change, so check the latest rules.
When can you withdraw?
On retirement at 58 or later, or when you are unemployed for a period. Partial withdrawals are allowed for certain needs such as a home, medical or marriage. Withdrawing early reduces the corpus that compounding would have built, so treat it as a last resort.
What is VPF?
Voluntary Provident Fund lets you contribute more than 12% of your basic. It earns the same interest rate as EPF. It suits people who want a steady, low-effort savings habit. Extra contributions also count towards the yearly limit for tax-free interest mentioned above, and the money is meant for the long term, so keep an emergency fund separate.
Plan the bigger picture
EPF alone may not fund your whole retirement. Use the Retirement Planner to see how EPF fits with your other savings.
Try the calculator
EPF CalculatorRetirement Planner
Frequently asked questions
What is the current EPF interest rate?
The EPFO declares the rate every year. Enter the latest declared rate in the calculator. The default of 8.25% was the declared rate for FY 2024-25.
Does my employer’s full 12% go to EPF?
No. 8.33% of wages up to ₹15,000 goes to the pension scheme (EPS). The rest goes to your EPF account.
Is EPF interest taxable?
Interest is tax-free on your contributions up to ₹2.5 lakh a year (₹5 lakh if there is no employer contribution). Interest above that is taxable.
When can I withdraw my EPF?
On retirement at 58 or later, or when you are unemployed for a period. Partial withdrawals are allowed for certain needs such as a home, medical or marriage.
What is VPF?
Voluntary Provident Fund lets you contribute more than 12% of your basic. It earns the same interest rate as EPF.