The Employees’ Provident Fund or EPF is an extremely popular social security scheme that almost everyone working in the organised sector adopts. A completely secure, long-term, tax-efficient and guaranteed return scheme, EPF interest rate is 8.25% on deposits for the last financial year 2023-24. Incidentally, when EPF interest rate is compared to the Public Provident Fund (PPF), the former offers a higher one, by as much as 140 basis points.
The EPF scheme was introduced in 1952 to put in the hands of a retiree a neat sum that has accumulated over the years and which can take care of most of the basic expenditure of one’s family in life after retirement. PF is administered by EPFO (Employees Provident Fund Organisation).
Every month an employer (registered under the EPFO) is supposed to deduct 12% of the basic + DA of any employee and deposit the amount in his/her name maintained with the EPFO. The employer also makes a matching 12% contribution. The employer’s contribution is split into two parts with 3.67% going to the PF account of the employee and 8.33% goes to a pension fund also maintained and administered by the EPFO.
Therefore, it is quite natural that everyone would be interested in the indicative sum that can accumulate in one’s PF at retirement. Let’s find out how much money would one accumulate in one’s working life in the PF account.
Basic assumptions
The basic assumptions here are: an individual starts his/her working life at 25 years and he/she works till 58 years. We would also assume two scenarios: one where the employee gets an annual increment of 10% and two, where the rate of increment is halved to 5%. The interest rate has been assumed to be 8.25%, which is what the EPFO gave in 2023-24.
The other assumption is that he/she works without any break in service, which means the contributions to the PF account take place every month.
EPF interest rate: Scenario One
If an individual starts work at 25 with a basic salary of Rs 5,000 he/she will accumulate Rs 27.80 lakh in the EPF account at 58 years if the rate of increment in the salary does not rise higher than 5%.
If the rate of increment rises to 10%, the sum accumulated at retirement jumps to Rs 64.81 lakh.
EPF interest rate: Scenario Two
If an individual starts work at 25 with a basic salary of Rs 8,000 he/she will accumulate Rs 45.09 lakh in the PF account at 58 years if the rate of increment in the salary is 5%.
If the rate of increment rises to 10%, the sum accumulated at retirement jumps to Rs 1.09 crore.
EPF interest rate: Scenario Three
If an individual starts work at 25 with a basic salary of Rs 10,000 he/she will accumulate Rs 58.56 lakh in the PF account at 58 years if the rate of increment in the salary is 5%.
If the rate of increment rises to 10%, the sum accumulated at retirement jumps to Rs 1.40 crore.
Employees’ Provident Fund is one of the safest tools of investment available to any employee. EPF interest rate on the accumulated amount in an individual’s PF account is determined every year by the EPFO. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
