According to reports from Mint, regular contributions to the Employees' Provident Fund (EPF) can yield substantial returns over time. A ₹5,000 monthly contribution over a 30-year period can potentially grow to approximately ₹80 lakh. The EPF offers an interest rate of 8.25% per annum, applicable to over 70 million subscribers nationwide. Most employees contribute 12% of their basic salary plus dearness allowance (subject to a maximum of ₹15,000) every month towards EPF, while employers contribute an equivalent 12%, with 3.67% deposited into the EPF account and the remaining 8.33% directed to the employee's EPS account.
As reported by Mint, employees currently contributing around ₹1,200 per month can top up their contributions through the Voluntary Provident Fund (VPF) to reach the ₹5,000 monthly target. According to Shreya Sharma, Founder and CEO of Rest The Case, VPF is not a separate account but an extension of EPF where voluntary contributions earn the exact same 8.25% interest rate for FY 2025–26. VPF contributions qualify for the same 8.25% interest, are tax-free at maturity, and are eligible for an additional 80C deduction under the old tax regime. VPF contributions appear as separate deductions in salary slips, allowing employees to contribute more than the mandatory 12% through voluntary contributions.
According to Sharma's analysis reported by Mint, compounding is exponential rather than linear, with the heaviest growth occurring in later years. If two individuals each contribute ₹5,000 per month at 8.25% for 30 years, the first person leaving funds untouched will accumulate nearly ₹80 lakh, while the second person withdrawing every 10 years across three cycles will end up with only ₹28 lakh. This represents a loss of nearly ₹51 lakh due to the elimination of the large accumulated base each time withdrawals occur. Withdrawal rules allow full withdrawal after retirement at age 58 or after 2 months of unemployment, partial withdrawal after 5 years for medical, housing, education, or marriage purposes, with tax-free status if withdrawn after 5 years of continuous service.
As reported by Mint, while the 8.25% annual return appears strong on paper, inflation at 4-5% in India reduces the real rate to 3-4%. According to Ishkaran Chhabra, Founding Partner at Centricity WealthTech, the ₹5,000 monthly contribution may build a corpus of around ₹80 lakh over three decades, but its actual purchasing power would feel closer to ₹20-25 lakh in real terms. However, EPF remains an EEE benefit tool - exempt from investment, maturity amount, and interest earned - with employee contributions up to ₹1.5 lakh annually exempt under Section 80C of the old tax regime. The scheme offers tax-free status at maturity and qualifies for Section 80C deductions under the old tax regime.
