The Employees’ Provident Fund Organisation (EPFO) manages one of the best money-making schemes for workers. This is the EPF. Notably, employees earning in excess of Rs 15000 can become a part of this scheme. And as with any other such retirement-oriented schemes, the sooner a person starts, the greater is the money he will end up with, even turn into a crorepati. That is because of the high EPF interest rate of 8.25% and the benefits derived from compounding.
EPF benefits
There are many benefits attached to the EPF even though it is not a voluntary scheme. As soon as the employee joins the organisaton, a part of his salary is diverted to the EPF, plus the employer’s contribution. Both contribute 12% of the salary and out of the employer’s contribution, 3.67% goes into the employee’s EPF account.
Another big benefit is that the EPF has an Exempt-Exempt-Exempt status when it comes to paying income tax on it. Actually, any interest up to Rs 2.5 lakh per year is tax-free. If the interest exceeds this amount, it is taxable.
Rs 30000 salary: How EPF money grows
Let us assume that an employee has a basic salary of Rs 30000 at the age of 21. He works till retirement, which is 58 years. The employee also gets regular increments in his pay, that we assume to be an average of 6% every year. The current EPF interest rate is 8.25%.
When these sums are put together and calculated in the EPF calculator, the amount that emerges is really eye-ball grabbing. The EPF calculator shows that this employee will get as much as Rs 3,70,92,968!
Yes, the employee will have ended up as a multiple crorepati on the strength of only his Employees’ Provident Fund account.
The only thing an EPF subscriber should ensure is not to withdraw any money during his working years. The EPF withdrawal should happen on retirement only.
NOTE: The sums mentioned here are estimates and te actual amounts will be provided in the EPF passbook.
EPF interest rate is more than what even bank FD are offering and therefore, it can turn an employee into a multiple crorepati. Know how. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
