Kolkata: One of the perennial tragedies of life is that though an average person stops earning at 58 or 60 years of age, expenditure never stops and continues till a person breathes his/her last. Employees’ Provident Fund, or EPF, is one of the fundamental social safety nets that is available to a worker and is specifically designed to take care of his/her life after retirement.
EPF makes a one-time lumpsum payment to an employee. It depends on long-term compounding that takes place throughout the working life of an employee that usually takes place well over 30 years. Moreover, EPF enjoys a sovereign guarantee and both the capital and interest enjoy the highest degree of safety that is available in India. The corpus accumulated under EPF is usually free from Income Tax under a certain limit. Moreover, EPFO (Employees Provident Fund Organisation) has facilities for EPF passbook and EPF balance check. It also allows EPF withdrawal under some predefined special conditions.
How is EPF corpus built over the years
An EPF corpus is created by taking contributions from the employee concerned and the employer. As much as 12% share of the basic salary and DA (Dearness Allowance) is taken from the employee’s salary every month and put in the EPF account. As matching amount is taken from the employer as well but 8.33% is deposited in an account from which a monthly pension will be paid to the employee after retirement. The other part (12% – 8.33% = 3.67%) is put in the EPF account along with the 12% that comes from the employee. EPF is paid according to a formula laid down by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which extends to the entire country.
How much money does EPF create for you: A humble sample
Assume you begin working at 23 years. Here is a sample calculation at what EPF can create for you at retirement, which, say, takes place when you are 58. An online EPF calculator will tell you that the amount accumulated in the EPF account when the person turns 58 will be Rs 55,06,496, or more than Rs 55 lakh. Now look the basic assumptions we have done when making this calculation. We have assumed an initial basic salary of Rs 8,000, which is a low one. Moreover, we have also assumed that the employee gets an average salary increment of 5% — which is barely the same as the average retail inflation rate in India. We have also assumed that EPFO will pay an interest of 8.25% (the rate paid in FY24). Obviously, any rise in any of these factors will result in a far bigger amount at retirement. Also keep in mind the monthly pension from EPFO.
Employees’ Provident Fund, or EPF, is one of the most trusted and potent employee welfare schemes that are offered to an employee in India. Regular employees of any firm with 20 or more people are entitled to EPF which offers big gains for them for their post-retirement life. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
