This study analyzes the performance of variable capacity heat pump scroll compressor which is equipped with vapour injection and permanent magnet motor. Refrigerant used in the system is R410A. The study is divided in two phases. In first phase, tests are carried out for heat pump without vapour injection. Heat pump’s performance including COPs, heating/cooling capacities, inverter losses, heat transfer behaviour in condenser/evaporator are analyzed. Inverter losses increase but the ratio of inverter losses to the total compressor power decreases with increase in compressor speed. Electromechanical losses of compressor are much higher than the inverter losses and so make most part of the total compressor losses (summation of inverter and electromechanical losses). In second phase benefits of vapour injection are analyzed. For vapour injection, heat pump’s performance is evaluated for two different refrigerant charges: 1.15kg and 1.28kg. It is noted that heat pump performs better for refrigerant charge 1.15kg even at lower compressor speeds as compared to refrigerant charge 1.28kg. For refrigerant charge 1.15kg, heat pump COP cool with vapour injection increases by an average of 10.66%, while COP heat increases by an average of 9.4%, at each compressor speed except for 30Hz, as compared to conventional heat pump cycle with no vapour injection. Similarly refrigerant temperature at outlet of compressor also reduces with vapour injection which leads to the better performance of heat pump.