How Employees Can Maximise EPF Benefits By Tweaking Contribution Ratios To Get Rs 2 Cr+ Retirement Corpus?

Under India's Employees' Provident Fund (EPF) Act, salaried workers contribute 12% of their basic pay plus dearness allowance to their PF accounts. The employer contributes another 12%. However, only 3.67% of the employer's share goes to the EPF; 8.33% funds the Employees' Pension Scheme (EPS) and 0.5% is allocated to the Employees' Deposit Linked Insurance (EDLI) scheme. These statutory contributions are currently rewarded with an 8.25% annual interest rate. The central government approved this rate for FY 2024‑25 in May 2025, continuing the 8.25 % rate introduced in 2023‑24.

The power of Voluntary Provident Fund (VPF)

Young professionals can enhance their retirement corpus by topping up their EPF through the Voluntary Provident Fund (VPF). The VPF is essentially an extension of the EPF that allows employees to make additional contributions to their PF account beyond the mandatory 12 %.

"Participation is optional, but it is a government‑backed, low‑risk instrument that currently offers the same 8.25 % interest rate as EPF. Employees may contribute up to 100% of their basic salary and dearness allowance under the scheme, and contributions plus interest qualify for tax benefits under Section 80C. Because VPF is categorised as "Exempt‑Exempt‑Exempt," contributions, interest and withdrawal proceeds remain tax‑free, though finance ministry rules stipulate that interest on employee contributions exceeding Rs 2.5 lakh per year becomes taxable," said Pratik Vaidya, Managing Director and Chief Vision Officer, Karma Management Global Consulting Solutions Pvt. Ltd.

In practice, this limit affects high earners or those channeling very large sums into VPF.

Why should young employees reconsider contribution ratios?

Young earners often focus on immediate expenses, but small changes in savings ratios early on can significantly influence long‑term wealth. As contributions compound tax‑free at 8.25 %, increasing the contribution ratio even modestly can produce outsized benefits over decades. The mandatory 12 % on a Rs 40,000 basic salary equates to Rs 4,800 per month.

"Suppose a 25‑year‑old makes only the statutory 12 % contributions until age 60. At 8.25 % annual interest (credited monthly), their corpus would grow to roughly Rs 1.17 crore after 35 years. Increasing the contribution to 22% (an extra 10 % through VPF, or Rs 4,000 per month) nearly doubles the future value to about Rs 2.15 crore; the difference-approximately Rs 97 lakh-comes purely from higher contributions and compounding over time. Even adding 7% (Rs 2,800 per month) boosts the corpus by roughly Rs 68 lakh," Pratik Vaidya commented.

These figures illustrate why it pays to tweak ratios when one's salary is still growing.

Strategies to maximise EPF benefits

• First of all, employees should start early and commit to higher contributions. They should begin VPF contributions as soon as possible and increase the percentage whenever they receive increments. Compounding rewards time more than size, so the earlier years matter most.
• Second, employees should take advantage of Section 80C fully. They should use EPF and VPF to exhaust the Rs 1.5 lakh annual deduction; contributions beyond that limit still earn interest but may be taxed if total employee contributions exceed Rs 2.5 lakh.
• Employees should keep their PF account active. They should transfer their EPF/VPF balance whenever they change jobs. Accounts become dormant after 36 months of inactivity, and interest on dormant accounts beyond retirement age is not credited.
• Early withdrawals should be avoided. While EPF permits partial withdrawals for housing, illness or education, tapping into the corpus reduces compounding benefits. Employees should use other savings or loans for short‑term needs.
• Finally, monitoring interest credits and updating details are important. Employees need to check their EPF passbooks regularly and ensure KYC details are updated to avoid delays in interest crediting.

The compounding effect

Compounding is the secret sauce of retirement planning. As EPF/VPF interest is credited annually and added to your principal, the corpus grows at an accelerating pace. Starting early—especially in one's 20s—allows contributions to compound for 30-35 years, making each rupee saved today worth many times more at retirement. Increasing one's contribution ratio by even a few percentage points can transform their retirement outcome.

Final thoughts

With 8.25% interest and tax benefits, EPF and VPF remain among the most attractive fixed‑income options for Indian employees. Young professionals who proactively tweak their contribution ratios can harness the twin advantages of steady returns and compounding to build a strong retirement corpus. The discipline to save more when earnings are modest pays off dramatically in later years.

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