If you are a salaried employee, 12 per cent of your basic salary plus dearness allowance would already be going into the Employees’ Provident Fund (EPF) each month. Your employer would be making a matching contribution. In addition, you can also invest up to 100 per cent of your basic salary plus dearness allowance in VPF.The returns you earn will be the same as in EPF. EPF gave a return of 8.65 per cent in 2016-17. This is better than the rate offered by Post Office small savings schemes (see table). The State Bank of India now offers 5.50-6.75 per cent on its fixed deposits. The best rates offered by any bank go up to 7.50 per cent (about 50 basis points higher for senior citizens) for a tenure of up to five years.
The rate offered on EPF/VPF for 2017-18 will be known only in November-December or later. While it could decline from the current level if interest rates within the economy continue to fall, the returns from EPF/VPF are likely to be the most attractive on the fixed-income side.