While you work at office, or elsewhere, your Employees’ Provident Fund account, or EPF, works silently for you. The EPF, the earliest social security scheme for blue and white-collar employees in India, was introduced as early as 1952 and has been faithfully serving generations of employees both in the controlled and market economies.
The EPF depends on legally defined contributions from every employee and the employer for creating a corpus for use in the post-retirement years. It deducts 12% from the basic salary and DA of the employee and a matching amount from the employer, though only 3.87% from the employer’s contribution is invested in the EPF. The rest 8.33% is put in the EPS (Employee Pension Account) that is used to pay a monthly pension to the employee at or after 58 years.
How can I calculate my EPF account
You can create a corpus in excess of Rs 2.5 crore in your EPF account if you can satisfy a few conditions. The provident fund of an employee depends on a few factors such as the basic salary of the employee, his Dearness Allowance (or DA), the rate of interest that the government fixed on the balance amount in the EPF account every financial year, the average rate of increment that the employee gets every year during the working years. The other factors – share of contributions by the employee and employer and defined by legislations.
How to create a corpus in excess of Rs 2.5 crore
Assume the following: An employee begins working at the age of 25 years with an initial basic salary of Rs 36,000. He/she gets an average salary increment of 5% during his/her career. Let’s also assume that the rate of interest is 8.25% that EPFO fixed every year. In this case, the EPF account will have Rs 2.63 crore. Remember 8.25% interest was paid in the year FY24. Even if the interest is reduced to 8.1%, the balance in the EPF account when the employee turns 58 will become Rs 2.56 crore.
While the EPF, or Employees’ Provident Fund calculator has immense power to build a significant retirement corpus, the best way to use it to the hilt is never to withdraw any money from the pool. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
