Employees’ Provident Fund Account : If you do a private job (organized firm) or a government job, then a part of your salary is deducted and deposited in the Employees Provident Fund i.e. EPF account. This EPF account is of great importance, which can secure your future financially. Therefore, it is important not to ignore the importance of this account. If your basic salary is just 20 thousand or 25 thousand, then it can make you a millionaire on retirement, and also arrange for pension. Here, with a calculation, you can understand that if your basic salary is 25 thousand at the age of 25, then how you are sure to get a fund of 2 crores on retirement.
Employees Provident Fund is a retirement savings scheme. The work of managing this account is being done by the Employees Provident Fund Organisation (EPFO). The purpose of the EPF account is to make the retirement life of employees easier.
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Rules for depositing money in the account
For EPF account, the employee has to contribute 12% of his salary which is made up of his basic salary and dearness allowance. The company or employer also contributes the same amount from its side. Out of the company’s contribution, 8.33% goes to EPS i.e. pension fund. Whereas the company’s contribution to EPF is only 3.67%. Every year the government decides the interest on the amount deposited in the EPF account. Currently the interest rate on this is 8.25% per annum.
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EPF Calculator : Basic salary of Rs 25 thousand
Age of the employee: 25 years
Retirement age: 60 years
Basic Salary + DA: Rs 25,000
Contribution from employee: 12%
Contribution from company: 3.67%
Annual increment estimate: 5%
Interest on PF: 8.25% p.a.
Total contribution: Rs 45,05,560
Fund on retirement: Rs 1,81,04,488 (around Rs 1.81 crore)
Total interest benefit: Rs 1,35,99,128
Here, you will get Rs 1.81 crore every year with just 5% increment. But if the increment increases a bit in between, then this amount will reach Rs 2 crore, which is quite possible.
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How much is deposited every month
Basic Salary + Dearness Allowance (DA) = Rs 25,000
Employee’s contribution to EPF = 12% of Rs 25,000 = Rs 3000
Company’s contribution to EPF = 3.67% of Rs 25,000 = Rs 917.50
Company’s contribution to EPS = 8.33% of Rs 25,000 = Rs 2082.50
Monthly contribution to EPF account = Rs 3000 + 917.50 = Rs 3917.50
Interest gets added on this amount every month.