EPFO Calculator: Today we will calculate how much money we will get as lump sum and how much monthly pension till retirement, starting from the age of 25 years and with a basic salary of Rs 20,000.
EPF Calculator: Retirement is an important part of every person’s life. This is the time when you want to get free from the job and fulfill your remaining dreams in comfort, or want to travel and spend time with family. But the most important thing for this is money. Most people in India rely on schemes like Employees’ Provident Fund (EPF) for retirement. This is a government scheme that helps employed people to save for retirement. But the question arises that if you are 25 years old and basic salary is Rs 20,000, then how much money can you get on retirement? In India, Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) are two such schemes that make retirement secure. In this story, we will know in simple words and through calculations that if the salary is Rs 20,000 per month, then how much fund and pension can you get from it after 35 years?
What is EPF and EPS and how does it work?
First of all, let us know about EPF and EPS. EPF is a scheme in which a part of your salary is deducted every month and the same part is deposited by your employer. This money is deposited with the Employees Provident Fund Organization (EPFO) and you get interest on it. The interest rate of EPF has been fixed at 8.25% for the financial year 2024-25. The biggest advantage of this scheme is that the money deposited in it, the interest received on it and the amount received on retirement are tax-free.
Every month 12% of your basic salary and dearness allowance (DA) is deducted in EPF.
Now let’s come to EPS. EPS is a pension scheme and that too runs under the Employees Provident Fund Organization (EPFO). Its purpose is to give you pension every month after retirement. The money in EPS comes from the contribution of your employer. When 12% is deducted from your salary for EPF, the employer also contributes 12%. Out of this 12%, 8.33% goes to EPS. The remaining 3.67% goes to EPF.
But there is a catch in EPS. This contribution is applicable only on up to Rs 15,000 of your basic salary and dearness allowance. This means that even if your basic salary is more than Rs 15,000, 8.33% will be counted in EPS only on Rs 15,000.
How much money goes from your salary?
Suppose your basic salary is Rs 20,000. Out of this, your contribution: 20,000 × 12% = Rs 2,400 per month to EPF.
Employer’s contribution: 20,000 × 12% = Rs 2,400, which is divided into two parts:
To EPS: 15,000 × 8.33% = Rs 1,250 (as EPS is calculated on a maximum salary of Rs 15,000).
To EPF: 2,400 – 1,250 = Rs 1,150.
Total to EPF: 2,400 (yours) + 1,150 (employer’s) = Rs 3,550 per month.
To EPS: Rs 1,250 per month.
How much fund from EPF after 35 years?
You are 25 years old and will retire in 60 years, that is, there is a time of 35 years. Every month Rs 3,550 is deposited in EPF. In a year it becomes: 3,550 × 12 = Rs 42,600.
Now this money will grow for 35 years with 8.25% interest. To make it easier, we estimate compounding. By depositing Rs 42,600 every year, after 35 years at 8.25% interest, you will get about Rs 68.9 lakh.
Every year your money grows. In the first year, Rs 42,600 will get 8.25% interest (Rs 3,514). Next year this interest will be received on the previous money and interest as well. By continuing like this for 35 years, this amount reaches 68.9 lakhs.
How much pension from EPS?
Every month Rs 1,250 is being deposited in EPS. This converts into pension after retirement. The pension calculation is done as follows:
Pension=(Years of service×Average salary)÷70 Pension = (Years of service×Average salary)\div 70 Pension = (Years of service×Average salary)\div 70
Years of service: 35 years.
Average salary: Basic salary of the last 60 months. In EPS, this is counted up to the limit of Rs 15,000.
So, pension = (35 × 15,000) ÷ 70
= 5,25,000 ÷ 70
= Rs 7,500 per month.
What is the total benefit?
Now add the two:
From EPF: Rs 68.9 lakh (lump sum).
From EPS: Rs 7,500 per month.
It is difficult to convert a pension into a lump sum, but let’s assume you live for 20 years (60 to 80 years) after retirement:
7,500 × 12 × 20 = Rs 18 lakh.
Total benefit: Rs 68.9 lakh + 18 lakh = Rs 86.9 lakh. But this is just an estimate, as the pension lasts for your entire life.
How much will be the benefit of salary increase?
For now we have assumed that the salary will remain Rs 20,000 only. But what will happen if the salary increases by 5-10% every year?
5% increase: EPF fund can reach Rs 1.2 crore in 35 years.
10% increase: It can be more than Rs 2 crore.
Contribution to EPS will remain Rs 1,250 only, but the pension can be slightly higher due to salary increase. However, the limit of Rs 15,000 of EPS is still applicable.
Is this enough for old age?
Rs 68.9 lakh and Rs 7,500 monthly pension can be considered good as of now. But after 35 years, its value will be less due to inflation. If you want at least Rs 1 crore or more on retirement, then apart from EPF, you will have to invest in other schemes as well. You have options like Mutual Funds, National Pension System or Stock Market. If you invest Rs 2,000-3,000 separately every month in these, then your retirement fund can double.
(Disclaimer: This is only an estimate. The calculation is done assuming EPF interest rate of 8.25% per annum. The actual deposit amount may change as per EPF interest rate and salary hike. Hence, view this only for information purpose and confirm with EPFO for exact figures.)
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