EPF Calculation: Employed Provident Fund (EPF) is a retirement benefit scheme for the salaried employees of the private sector. A fund of crores of rupees can be created in this scheme.
EPF Calculation: Employed Provident Fund (EPF) is a retirement benefit scheme for the salaried employees of the private sector. It is managed by the Employees’ Provident Fund Organization (EPFO). In the EPF account, there is a contribution from both the employee and the employer. This contribution is 12-12 per cent of the basic salary plus dearness allowance. The interest rates of EPF are fixed every year by the government. At present, 8.5% annual interest is being received. EPF is such an account, in which gradually large corpus is formed till retirement. In this, there is a tremendous benefit of compounding of interest.
Retirement fund on 10 thousand basic salary
Suppose your basic salary and dearness allowance is Rs 10,000. If you are 25 years old, then by the age of 58, you can have a retirement fund of Rs 1.29 crore ready for retirement. The maximum contribution can be made in the EPF scheme only up to 58 years.
Understand EPF Calculation
- Basic Salary + DA = Rs.10,000
- Present age = 25 years
- Retirement age = 58 years
- Employee monthly contribution = 12%
- Employer monthly contribution = 3.76%
- Interest rate on EPF = 8.5% per annum
- Annual salary growth = 10%
Maturity Fund at the age of 58 years = 1.29 crores (Employee contribution is Rs 35.34 lakh and Employer contribution is Rs 10.81 lakh. Means some contribution is Rs 46.15 lakh.)
(Note: Annual interest rate has been taken at 8.5 per cent and salary growth at 10 per cent for the full year of contribution.)
Employer’s entire 12% is not deposited in EPF
12% of the basic salary and Dearness Allowance (Dearness Allowance) of the employee is deposited in the EPF account. But, the employer’s 12 percent amount is deposited in two parts. Out of 12 per cent contribution of the employer, 8.33 per cent is deposited in the Employee Pension Account and the remaining 3.67 per cent goes into the EPF account.
Understand contribution from 10,000 salary
- Employee Basic Salary + Dearness Allowance = Rs.10,000
- Employee contribution in EPF = 12% of Rs 10,000 = Rs 1200
- Employer’s contribution to EPF = 3.67 per cent of Rs 10,000 = Rs 367
- Employer’s contribution to Pension Fund (EPS) = 8.33 per cent of Rs 10,000 = Rs 833
In this way, the total monthly contribution in the EPF account of an employee with a basic salary of Rs 10,000 in the first year will be Rs 1567 (Rs 1200 + 367). After this, the basic and dearness allowance will increase in the same proportion with a 10% increase in the salary on an annual basis. With which the EPF contribution will increase. It is mandatory for the employees whose basic salary is less than Rs 15,000 to join this scheme.
