The Employee Provident Fund is a wonderful scheme that provides retirement benefits for all those people who are working in non-government organizations, that is all salaried employees in private sectors. Let me tell you that there is a deduction in the EPF account of employees in the organized sector for both the employee and the company under this scheme, which is 12% of the basic salary (+DA) from both sides.
The fixed interest rates of EPF are declared by the government every year. For the financial year 2022-23, 8.1 percent annual interest has been fixed. EPF is an account that gradually builds a very powerful budget until retirement.
Retirement funds on ₹25 thousand basic salary
If the basic salary plus dearness allowance of a person is Rs 25,000, he is 30 years old, and the retirement age is 58, then on retirement, he can have nearly Rs 1.68 crore. This amount basically depends on what is put in the EPF account and how the interest is earned. However, one should also know that a person can only contribute to the EPF scheme till the age of 58 years. To know about it in detail, see the below calculations carefully –
EPF Calculation
- Basic salary + DA = ₹25,000
- Current age = 30 years
- Retirement age = 58 years
- Employee monthly contribution = 12 percent
- Employer monthly contribution = 3.67 percent
- Interest rate on EPF = 8.1 percent per annum
- Annual salary growth = 10 percent
Maturity fund at the age of 58 = 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
The employer contributes 3.67% in the EPF.
From the salary, the employee’s basic contribution towards the Employee Provident Fund (EPF) account will be 12% of its basic salary and dearness allowance. The employee must also contribute 0.5% to EDLI by the employer.
The burden of cost administration for the employer is 1.1% for EDLI and 0.01% for EPF. Thus, contribution by an employer will amount to a total of 13.61% of the employee’s income. Mandatory for employees earning less than Rs. 15,000 as basic to be under the scheme.
How do I calculate PF interest?
Interest is paid on a monthly running balance of the fund because it comprises deposits made every month into the account. This figure is computed at the end of the year; the 8.5% received from the Ministry of Finance was approved before the end of the year for the fiscal year 2021-2022.
Then, after this approval from the Finance Ministry, the Ministry of Labor declared an interest rate of 8.1% on Employees’ Provident Fund Organization deposits. This 8.1% interest rate for 2021-2022 happens to be the second-lowest in over 40 years. Besides this, it is quite below 8.5% of 2020-21 and 2019-20.
