The VPF Interest Rate is 8.15% for the financial year FY 2022-23.
I know you want to know much more about the historical Voluntary Provident Fund interest rates. But before we see the full multi-decade details of the VPF Interest Rate History in India, let’s first briefly see a bit more about VPF and how it works with EPF or how different VPF and EPF are.
For Indian employees who are already covered under the regular EPF (Employee Provident Fund) system, there is an option to make additional or Voluntary Contributions to their EPF Account by them as well.
This facility is what is known as VPF or Voluntary Provident Fund. And that is the VPF meaning of voluntary PF.
In EPF, the employee contributes 12% of the basic salary towards the EPF provident fund account. This is matched with an equal amount by his employer’s contribution.
Now if the employee wants to invest more in EPF, i.e. in addition to the mandatory amount (of 12% basic pay), then the employee can choose to voluntarily contribute an additional amount to EPF account via VPF.
This additional amount is VPF contribution and it is termed as Voluntary Provident Fund.
But unlike in EPF, the employer is not obligated to contribute to your VPF and will not match your VPF contributions. On the other hand, the VPF contribution limit for an employee is that he/she can contribute up to 100% of basic salary and dearness allowance towards VPF. That is the maximum VPF contribution allowed in voluntary PF.
So EPF is a mandatory contribution while VPF Is a voluntary contribution.
Now with introductions done, let’s move ahead and have a detailed look at the Voluntary Provident Fund Rate History in India. You will be surprised to see how much the VPF rates have changed in past.
VPF Interest Rate History (Updated 2023)
Like EPF rates, even the VPF rate of interest is decided by the EPFO or Employee Provident Fund Organization (for the Government of India) on an annual basis.
As you know, currently the VPF Interest Rate is 8.15% for the financial year FY 2022-23.
But what about the voluntary provident fund interest rate in previous years?
Here is the full history of VPF Interest Rates in India:
- VPF Interest Rate 1969-70: 5.50%
- VPF Interest Rate 1970-71: 5.70%
- VPF Interest Rate 1971-72: 5.80%
- VPF Interest Rate 1972-73: 6.00%
- VPF Interest Rate 1973-74: 6.00%
- VPF Interest Rate 1974-75: 6.50%
- VPF Interest Rate 1975-76: 7.00%
- VPF Interest Rate 1976-77: 7.50%
- VPF Interest Rate 1977-78: 8.00%
- VPF Interest Rate 1978-79: 8.25%
- VPF Interest Rate 1979-80: 8.25%
- VPF Interest Rate 1980-81: 8.25%
- VPF Interest Rate 1981-82: 8.50%
- VPF Interest Rate 1982-83: 8.75%
- VPF Interest Rate 1983-84: 9.15%
- VPF Interest Rate 1984-85: 9.90%
- VPF Interest Rate 1985-86: 10.15%
- VPF Interest Rate 1986-87: 11.00%
- VPF Interest Rate 1987-88: 11.50%
- VPF Interest Rate 1988-89: 11.80%
- VPF Interest Rate 1989-90: 12.00%
- VPF Interest Rate 1990-91: 12.00%
- VPF Interest Rate 1991-92: 12.00%
- VPF Interest Rate 1992-93: 12.00%
- VPF Interest Rate 1993-94: 12.00%
- VPF Interest Rate 1994-95: 12.00%
- VPF Interest Rate 1995-96: 12.00%
- VPF Interest Rate 1996-97: 12.00%
- VPF Interest Rate 1997-98: 12.00%
- VPF Interest Rate 1998-99: 12.00%
- VPF Interest Rate 1999-00: 12.00%
- VPF Interest Rate 2000-01: 11.00%
- VPF Interest Rate 2001-02: 9.50%
- VPF Interest Rate 2002-03: 9.50%
- VPF Interest Rate 2003-04: 9.05%
- VPF Interest Rate 2004-05: 9.50%
- VPF Interest Rate 2005-06: 8.50%
- VPF Interest Rate 2006-07: 8.50%
- VPF Interest Rate 2007-08: 8.50%
- VPF Interest Rate 2008-09: 8.50%
- VPF Interest Rate 2009-10: 8.50%
- VPF Interest Rate 2010-11: 9.50%
- VPF Interest Rate 2011-12: 8.25%
- VPF Interest Rate 2012-13: 8.50%
- VPF Interest Rate 2013-14: 8.75%
- VPF Interest Rate 2014-15: 8.75%
- VPF Interest Rate 2015-16: 8.80%
- VPF Interest Rate 2016-17: 8.80%
- VPF Interest Rate 2017-18: 8.55%
- VPF Interest Rate 2018-19: 8.65%
- VPF Interest Rate 2019-20: 8.50%
- VPF Interest Rate 2020-21: 8.50%
- VPF Interest Rate 2021-22: 8.10%
- VPF Interest Rate 2022-23: 8.15%
That is the full history of VPF interest rates in India. And as you can see, there was a time in the not-so-distant past when the rates were a high 12% for several years. Imagine the glory days then when you were getting 12% risk-free!
For people who are also curious to know PPF vs VPF interest rates, I suggest you check the historical PPF interest rates as well. You will get an idea about the difference between PPF and VPF when it comes to returns (interest rates).
More Important VPF Rules
As per the latest VPF Rules in India, you should be aware of the following important facts:
- There is no separate VPF account. All VPF contributions go to the EPF account only, as the VPF is directly linked to your EPF account.
- And VPF contributions get the same rate of return as regular EPF contributions. That is, the interest rate of VPF and EPF are the same. You can have a look at the complete history of EPF interest rates from 1952-53 onwards till today.
So if you were looking for the difference between EPF Vs. VPF, then you got your answer above.
There are a few other things to note as per voluntary provident fund rules:
- Since EPF is only available to salaried employees (and not self-employed or businessmen), the VPF too is available only for salaried employees.
- The amount saved in VPF (as well as EPF) is available at the time of retirement or resignation. Before retirement and/or at the time of changing jobs, employees are allowed to transfer their VPF (and EPF) amounts from previous employers to new employers without withdrawing money if they want. And it’s best to not withdraw money from the provident fund before retirement if possible.
As I said earlier, VPF and EPF aren’t two different accounts. All your voluntary PF contributions are deposited to the existing EPF account only. And therefore, all the rules of EPF that apply to interest rate/loan/transfer/withdrawal from EPF are applicable to VPF as well.
How can one start contributing to VPF?
Good question. And it seems I have got you interested in VPF.
It’s easy to begin your VPF contributions. Just get in touch with your employer’s finance department. They will help you with the formalities and form fill-ups to get your VPF contributions going.
And do you get any tax benefits for your VPF contributions?
VPF Voluntary Provident Fund Tax Benefits (Updated 2023)
Just like EPF, even the VPF comes under the EEE or Exempt-Exempt-Exempt category. So the amount you contribute to VPF is exempted from tax. The interest you earn from VPF contributions is tax-free. And the VPF maturity amount is also fully tax-free in your hands.
What about VPF tax exemption?
As I said earlier, VPF too comes in the EEE category (read more about EEE vs EET vs ETE taxation in India). So your VPF contributions are eligible for tax exemption under Section 80C up to Rs 1.5 lac in a financial year.
Therefore as per the latest VPF tax rules, both VPF contributions and EPF contributions are exempt from taxation up to the specified limit of the relevant section of the Income Tax Act.
So if you want to hear it, then yes – VPF is tax-free!
Edited to add (2021 Update) – But very recently, the interest on the employee’s contribution to EPF above Rs 2.5 lakh a year has been made taxable. Read more about it here – EPF Interest taxable above Rs 2.5 lakh per year. Also, read how this will be taxed as detailed in How will EPF contributions above Rs 2.5 lakh be taxed? With 2 EPF accounts!
So all said and done…
Should You Invest in VPF?
Now that is not a simple question.
As I have said many times before, one should not judge a financial product just by its features. More important is to link investments to financial goals and then pick suitable products accordingly.
Never invest here and there in random products listening to people’s incomplete free advice or wrong financial advice given by agents.
Having said that, VPF being part of EPF is a pure debt product. So it can only be expected to give debt-like returns which are clearly evident from the historical VPF interest rates provided earlier.
VPF and EPF are no doubt suitable for saving for your retirement.
But a good retirement plan will have both equity and debt component in it. So debt aspect can definitely be handled via EPF and VPF. But since retirement for most people is several years or decades away, it is very important to have a decent equity component as well (here’s why). And that can be handled via doing regular SIP in good Equity Mutual Funds.
But before we end our discussion, remember that VPF provides a good risk-free return for VPF EPF account holders. But there are some limitations on the liquidity and withdrawals before retirement as per the voluntary provident fund rules.
So if you are planning to save money for the short term (less than 5 years or so), then you should not consider VPF for that. It is much better to use suitable debt funds from various debt fund categories or go for common bank fixed deposits.
VPF along with EPF is best suited for saving for your long term financial goals like retirement.
So if you are looking to plan your retirement properly (and you really should do it because retirement is a nasty problem!), then you should begin as early as possible and start investing in a suitable retirement savings portfolio.
If you find it tough to answer questions about retirement like – how much I need to save for retirement, how much retirement corpus is required, how much to invest monthly for retirement, etc., then its better to take professional help to plan your retirement:
Stable Investor Financial Planning Service
Remember, you only get one shot at retirement and you don’t get any loans for it either!
And many people are under the impression that just provident fund savings would be enough for retirement. I am telling you that such people need to wake up. It is highly likely that your savings in provident fund, i.e. EPF and VPF (Voluntary Provident Fund) alone will not be enough for your retirement. Do read why provident fund will not be enough for retirement.
So begin your retirement planning today itself.
Hope you found the detailed take on VPF Historical Interest Rates in India (Updated 2023) useful for your retirement planning needs and are now aware of how voluntary provident fund interest rates have changed over the years.