EPFO: If you are an employee then this news is for you. Actually, let us tell you that those with 25 thousand basic salary will get Rs 69.87 lakh on retirement. Let us tell you that this contribution is 12-12 percent of the basic salary (+DA)… Let us understand the complete calculation in the news below.
EPF Calculation: Employed Provident Fund (EPF) is a powerful scheme for retirement benefits to salaried employees working in the private sector. In the organized sector, contribution is made to the EPF account of the employees from both the employee and the company. This contribution is 12-12 percent of the basic salary (+DA).
EPF interest rates are fixed every year by the government. The annual interest rate for the financial year 2022-23 has been fixed at 8.1 percent. EPF is such an account in which big corpus gradually builds up till retirement.
Retirement fund on basic salary of ₹25 thousand-
Suppose your basic salary and dearness allowance (DA) is Rs 25,000. Your age is 30 years and retirement age is 58 years. According to EPF Calculator, if you get 8.1 percent annual interest on EPF till retirement. Also, if the average salary growth every year is 10 percent, then at retirement you can have a potential corpus of Rs 1.68 crore. Contribution can be made in EPF scheme only till 58 years.
EPF Calculation-
- Basic Salary+DA= ₹25,000
- Current Age= 30 years
- Retirement Age= 58 years
- Employee Monthly Contribution= 12%
- Employer Monthly Contribution= 3.67%
- Interest Rate on EPF= 8.1% Annual
- Salary Growth= 10%
Fund Maturity at the age of 58 years = Rs 1.68 crore (Employee contribution was Rs 50.51 lakh and employer contribution was Rs 16.36 lakh. Total contribution was Rs 69.87 lakh.)
(Note: The annual interest rate for the entire year of contribution has been taken as 8.1 percent and salary growth has been taken as 10 percent.)
3.67% of employer contribution in EPF-
12 percent of the employee’s basic salary and dearness allowance is deposited in the EPF account. But, the employer’s amount of 12 percent is deposited in two parts. Out of 12 percent contribution of the employer, 8.33 percent amount is deposited in the employee pension account and the remaining 3.76 percent amount goes to the EPF account. It is mandatory for employees whose basic salary is less than Rs 15,000 to join this scheme.
How is interest calculated on PF?
Interest calculation is done on the basis of money deposited in the PF account every month i.e. monthly running balance. But, it is deposited at the end of the year. According to the rules of EPFO, if any amount is withdrawn during the year from the balance amount on the last date of the current financial year, then the interest for 12 months is deducted from it. EPFO always takes the opening and closing balance of the account. To calculate this, the monthly running balance is added and multiplied by the interest rate/1200.
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