EPF Calculation: Employees’ Provident Fund (EPF) is a popular retirement savings scheme in India, in which employees and employers deposit money every month. It gives compound interest, which creates a good fund for retirement. The government fixes the interest rate on EPF every year, which is currently 8.25% per annum.
EPF Calculation: The Central Board of Trustees of EPFO is the biggest decision making committee of this organization, which is chaired by the Union Labor Minister. It includes representatives of trade unions, central and state governments, employees and employers.
If the EPFO interest rate remains at 8.25%, it will be the highest interest rate for the third consecutive year. This will benefit crores of EPF subscribers.
Let us tell you that in EPF, the employee can contribute up to 12% of his basic salary and DA, while the employer also contributes the same amount. But out of this, 3.67% goes to EPF and the remaining 8.33% goes to Employee Pension Scheme (EPS).
Now the question is, if someone’s basic salary is ₹ 15,000, then how much money will the employee get till retirement? Let’s understand with EPF calculation.
If a person starts a job at the age of 25 and his basic salary is ₹15,000 per month, then he will deposit 12% of his salary in EPF (Employee Provident Fund). There will also be an increment of 5% in the salary every year, and this contribution will continue till the age of 60.
EPF Calculation: How much amount will be deposited by the age of 60 with a basic salary of ₹15,000? (with 5% annual increase)
- Employee contribution (12%) = ₹25,47,574
- Employer’s EPF contribution (3.67%) = ₹7,78,883
- Employer’s EPS contribution (8.33%) = ₹17,68,691
- Total EPF contribution (employee + employer = 15.67%) = ₹25,47,574
- Interest on EPF (at 8.25% annual interest rate) = ₹75,81,663
- Total deposit amount (contribution + interest) = ₹1,01,29,237
Why is retirement planning important? Advice from PF expert Sushil Jain
Retirement planning should be an important part of everyone’s financial life. After insurance and emergency fund, it should be given the highest priority. Apart from retirement, there are loan options for all other financial goals, but there is no loan for retirement. Therefore, it is important to start planning for it as soon as possible.
EPF and VPF: Better option
Employees’ Provident Fund (EPF) is considered the best retirement saving tool. However, if the corpus of EPF is not sufficient for your retirement, you can invest in Voluntary Provident Fund (VPF). Up to the basic salary can be invested in VPF, which can accumulate more funds for retirement.
PPF: Option in case of no EPF
People who do not have the facility of EPF can opt for Public Provident Fund (PPF). The biggest advantage of PPF is that it cannot be attached even by court order. That is, even if someone is in debt, his PPF balance will be safe.
NPS: Option for higher returns
National Pension System (NPS) is also a great option for retirement planning. NPS is more aggressive than EPF and PPF, as it gives market-linked returns. EPF gives fixed returns, while NPS has the possibility of high returns. If a person wants to create a slightly higher return and a bigger fund, then he can choose NPS or a mix of EPF and NPS.
Other options: Insurance and SIP
Apart from this, retirement can also be planned through low-liquidity insurance products or high-liquidity mutual fund SIP.
According to PF expert Sushil Jain, only 25-30% of the funds required for retirement are prepared from EPF. Therefore, it is important to create the right mix of VPF, PPF, NPS and other investment tools along with EPF for retirement, so that adequate corpus can be created at low risk.
(Note: This is only an approximate estimate. The calculation is done assuming EPF interest rate of 8.25% per annum and salary growth of 5%. The actual deposit amount may change as per the change in EPF interest rate and salary growth. Hence, view this only for information purpose and confirm with EPFO for exact figures.)
Most Read Articles:
- EPFO Members Alert! You are getting the benefit of up to Rs 7 lakh without paying premium, do this quickly
- New Vande Bharat Train: Good news for the passengers! 2 New Vande Bharat train will run on these routes; Check routes, timing & details
- Credit Card Link UPI: Link your credit card to UPI from home, know step-by-step guide
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
