Legislated in 1952, the Employees’ Provident Fund, or EPF, builds a significant corpus for financial security of an employee and/or his/her family members in post-retirement years. It deducts 12% from the basic salary + DA (Dearness Allowance) of every employee and a matching amount from the employer. It is one of the earliest social security schemes implement in Independent India and has served generations of employees, both blue-collar and white-collar in the organised sector of India.
While the employee contribution is put in the EPF account, 3.67% from the employer’s contribution is credited there and the rest 8.33% from the employer goes to and EPS (Employee Pension Scheme) to pay a monthly pension to the employee. The EPF calculator tells us that even if a person starts out with a moderate basic salary (+ DA), the EPF account can generate a significant amount of money that he/she can get at retirement if he/she can stand out as a performer during the working life.
EPF calculator: See the amount with 10% increment
How can I calculate my EPF amount, is a popular question. With an EPF calculator, one can calculate the EPF amount. Let’s assume an employee gets 10% salary increment throughout his/her career. This is possible on a sustained basis if the authorities consider him/her as a performer. Let’s see what amount of final corpus does EPF generate for the employee at the end of career. Let’s assume this person starts earning at the age of 25 and retire at 58.
Starting salary at Rs 10,000
If the person begins earning Rs 10,000 – which is his/her basic salary (+ DA) – from the first month of working life and gets 10% salary hike every year, the EPF account will show Rs 64,81,419 when he/she turns 58 years. We have assumed in the calculation that EPFO (Employee Provident Fund Organisation) pays 8.25% interest every year on the amount in the EPF account. This is the rate paid for FY24.
How EPF makes you a crorepati
If the person begins by daring a salary of Rs 12,000 and Rs 15,000, the EPF account alone will make him/her into a crorepati. The amounts in the EPF account will jump, thanks to the power of compounding. If the starting salary (+ DA) is Rs 12,000, the final corpus will be Rs 1,72,34,714. If the starting salary is Rs 15,000, the final pool will sail past Rs 2.20 crore and stand at Rs 2,20,58,312.
Thanks to the power of long-term compounding, the EPF, or Employees’ Provident Fund, quietly builds a substantial pool of money with steady salary increments. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
