EPF: What will be maturity amount on salary of Rs 40K? How is PF calculated?

New Delhi: The Employees’ Provident Fund (EPF) is a government scheme. Administered by Employees’ Provident Fund Organization (EPFO), it’s aim is to create retirement savings funds for private employees working in an organised sector. Companies employing more than 20 individuals have to mandatorily enroll in the EPF scheme. Both employees and employers contribute a percentage of the employee’s basic salary towards the EPF. Presently, EPFO offers an annual interest rate of 8.25 per cent on these contributions. If you are earning a salary of 40,000, then you can create a fund of almost Rs 3 crore. Before checking the calculation, let’s see who has to contribute how much.

EPF Contribution Rates

EPF Contribution Rates for male and female employees varies in the first 3 years. Male employees and Employers contribute either 10 per cent or 12 per cent of employee’s basic salary towards EPF. However female employees contribute 8% of their basic salary for the first three years. It subsequently increases to 10 per cent or 12 per cent based on employer policy.

Establishments with fewer than 20 employees don’t need to contribute in EPFO. However if they choose to opt for this scheme, then the contribution rate is fixed at 10%.

EPFO interest rate

Breakdown of EPF Contributions:

Contributions to the EPF account are as follows:

Employee’s Provident Fund (EPF): 3.67 per cent of basic salary
Employee’s Pension Scheme (EPS): 8.33 per cent of basic salary (subject to a maximum cap)
Employee’s Deposit Linked Insurance Scheme (EDLIS): 0.50 per cent of basic salary
EPF Administration charges: 1.10 per cent of basic salary
EDLIS Administration charges: 0.01 per cent of basic salary

EPF interest rate

EPFO currently provides an interest rate of 8.25 per cent. So contribution made to EPF account will be as follows:

Employee’s contribution towards EPF (12% of Rs. 40,000): Rs. 4,800
Employer’s contribution towards EPF (3.67% of Rs. 40,000): Rs. 1,468
Employer’s contribution towards EPS (8.33% of Rs. 40,000): Rs. 3,332

Here, we are assuming that EPF account holders start contributing at age 25, with an annual salary increment of 5 per cent. They contribute 12% of their basic salary and DA until age 60. They are starting with a monthly salary of Rs. 40,000.

Total contributions made: Rs. 72,08,492
Interest earned: Rs. 2,17,58,595
Maturity amount: Rs. 2,89,67,087

How to check EPF balance

Annual Interest Rate on EPF Contribution

(Disclaimer: Yearly Interest rate is taken from the website of Bank Bazaar.)

 EPF Calculator: Presently, EPFO offers an annual interest rate of 8.25 per cent on these contributions. EPF Contribution Rates for male and female employees varies in the first 3 years.  Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today