EPF: 15 thousand basic salaries, age 40 years; How much fund will be available on retirement, understand the calculation

EPF Calculation: There is also a retirement benefits scheme for employees in the private sector. This scheme is the Employed Provident Fund (EPF). For the financial year 2022-23, the interest on EPF is getting 8.1 percent annually.

EPF Calculation: There is also a retirement benefits scheme for employees in the private sector. This scheme is the Employed Provident Fund (EPF). This scheme is for employees working in the organized sector. Employees' Provident Fund Organization (EPFO) manages this scheme. In the EPF account, there is a contribution from both the employee and the employer (company). This contribution is 12-12 percent of the basic salary plus dearness allowance. The interest rates of EPF are fixed every year by the government. For the financial year 2022-23, the interest on EPF is getting 8.1 percent annually. EPF is such an account, in which a gradually large corpus is formed till retirement.

Retirement fund on 15 thousand basic salary

Suppose your basic salary and dearness allowance together is Rs 15,000. If you are 40 years old, then till retirement i.e. by the age of 58, you can have a retirement fund of Rs 27.66 lakh ready. The maximum contribution can be made in the EPF scheme for only up to 58 years.

Understand EPF Calculation

Basic Salary + DA = Rs 15,000
Present age = 40 years
Retirement age = 58 years
Employee monthly contribution = 12%
Employer monthly contribution = 3.67%
Interest rate on EPF = 8.1% per annum
Annual salary growth = 10%
Maturity Fund at the age of 58 years = ₹27.66 Lakh

(Employee contribution is Rs 11.05 lakh and employer contribution is Rs 3.38 lakh. Some contribution is Rs 14.43 lakh.)

(Note: Annual interest rate is taken at 8.10 percent and salary growth is 10 percent for the full year of contribution.)

Employer's contribution to EPF is 3.67%

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 the 12 percent contribution of the employer, 8.33 percent is deposited in the Employee Pension Account and the remaining 3.67 percent goes into the EPF account.

Understand contribution from 15,000 salary

Employee Basic Salary + Dearness Allowance = Rs 15,000
Employee contribution in EPF = 12% of Rs 15,000 = Rs 1800
Employer's contribution in EPF = 3.67 per cent of Rs 15,000 = Rs 550
Employer's contribution to Pension Fund (EPS) = 8.33 per cent of Rs 15,000 = Rs 1249

In this way, the total monthly contribution in the EPF account of an employee with a basic salary of Rs 15,000 in the first year will be Rs 2350 (Rs 1800 + 550). Thereafter, 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 employees whose basic salary is less than Rs 15,000, it is mandatory to join this scheme.

(Note: Retirement fund figures for EPF are approximate. The calculation of the fund is on 8.1% interest and a 10 percent annual salary hike for the entire tenure. The actual fund may be different on change.)