An employee’s life is generally hard as money is very hard to come by and almost impossible to multiply. Most youngsters start with salaries that do not even qualify for the Employees’ Provident Fund Organisation’s (EPFO) starting point, which is up to Rs 15000. EPFO statement says, “Enrolment of all eligible employees on its rolls (regular or contractual) – wages upto Rs 15,000 at the time of joining the establishment.” That means many employees keep working away for many years without the benefit of an Employees’ Provident Fund (EPF) subscription.
The benefit that an EPF account brings in employees’ lives is indescribably important. Small amounts of money deducted from their salaries over many years and decades can lead up to the building of a satisfying corpus that can then be used to buy a big asset like a house or even ensure a constant stream of income even after retirement.
Clearly, both the employee and his family will benefit tremendously from this scheme. While government employees have their pension to fall back on, a private sector employee can get somewhat similar benefits from his EPF account.
EPF Windfall
Exactly what kind of EPF benefit are we talking about? Let us say that this individual started his EPF journey late at 27 years. He then works non-stop till retirement at 58 years. He starts with a salary of Rs 40000 and gets an average yearly increment of 7%. During this whole time, he does not withdraw any money from his EPF account. Also, he keeps the contributions flowing year after year. Losing his job would have disrupted the flow of money and that would have hurt. In this case, we will assume that he retains his job throughout.
The numbers are crunched by the EPF calculator and it reveals that the employee will get a tidy sum of Rs 3,17,49,288. Now, this amount is totally tax free and can be further invested in a bank fixed deposit or other avenues to get a steady stream of income. Check the EPF Calculator numbers:
Age: 27
Retirement: 58
Pay: 40000
Increment: 7%
EPF contribution: 12%
Employer’s Contribution: 3.67%
EPFO interest rate: 8.25%
EPF corpus on retirement: Rs 3,17,49,288
Benefit of joining EPF early
However, just imagine what he would have earned if he had started his EPF journey at the age of 21 even with a much lower salary of Rs 25000. All the other factors remaining the same, the man would have made a huge money pile of Rs 3,58,72,028
Age: 21
Retirement: 58
Pay: Rs 25000
Increment: 7%
EPF contribution: 12%
Employer’s Contribution: 3.67%
EPFO interest rate: 8.25%
EPF corpus on retirement: Rs 3,58,72,028
EPF calculator shows how you can turn your Rs 40000 salary at the start of your PF journey into a mammoth figure like Rs 3,17,49,288. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
