The Employees’ Provident Fund Organisation (EPFO) is a key retirement savings scheme in India, ensuring financial security for millions of salaried employees. If you’re contributing ₹7,200 per month towards your Employees’ Provident Fund (EPF), you could accumulate a massive ₹1.11 crore by the time you retire! But how does this work? Let’s break it down in simple terms.
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What is EPFO and How Does It Work?
EPFO manages the Employees’ Provident Fund (EPF), a retirement benefit scheme where both the employer and employee contribute 12% of the employee’s basic salary and dearness allowance (DA) every month.
- Employee Contribution: 12% of basic salary goes to EPF.
- Employer Contribution: 8.33% goes to Employees’ Pension Scheme (EPS) and 3.67% to EPF.
This pooled fund earns compounded interest, making it a great long-term savings option.
Example Calculation:
Assume your basic salary is ₹60,000 per month:
- Your Contribution: 12% of 60,000 = ₹7,200
- Employer Contribution:
- 8.33% to EPS = ₹4,998
- 3.67% to EPF = ₹2,202
Total contribution in EPF account each month = ₹7,200 + ₹2,202 = ₹9,402
Over 30 years, with an 8.15% annual interest rate, this corpus grows to ₹1.11 crore!
How EPF Accumulates Over Time
Understanding the Power of Compounding
One of the biggest advantages of EPF is compounding interest. The longer you contribute, the more your savings grow. Here’s how it works:
| Years | Estimated EPF Balance (Assuming 8.15% Interest) |
| 10 years | ₹22 lakh |
| 20 years | ₹59 lakh |
| 30 years | ₹1.11 crore |
Even if you increase your salary over time, your contributions and savings will grow exponentially.
How to Check Your EPF Balance?
- Via the EPFO Portal: Log in to EPFO’s official website and check your passbook.
- UMANG App: A mobile-friendly app for checking your EPF balance.
- Missed Call/SMS: Dial 9966044425 or send an SMS to 7738299899 with “EPFOHO UAN ENG”.
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Additional Benefits of EPF
1. Tax-Free Savings
- EPF falls under Exempt-Exempt-Exempt (EEE) tax status, meaning contributions, interest, and withdrawals are tax-free (subject to conditions).
2. Loan Against EPF
- Employees can take loans against EPF balance for home purchases, medical emergencies, and education expenses.
3. Partial Withdrawals for Emergencies
- EPF allows withdrawals for medical emergencies, home loans, or marriage expenses.
How Much Pension Can You Get from EPS?
The Employees’ Pension Scheme (EPS) provides a monthly pension after retirement. It is calculated as:
Pension Amount = (Pensionable Salary × Service Years) / 70
Example Calculation:
- Pensionable Salary = ₹15,000 (Max limit)
- Service Years = 35
Pension = (15,000 × 35) / 70 = ₹7,500 per month
This pension provides a steady post-retirement income, in addition to your EPF corpus.
EPFO Retirement Benefit (FAQs)
1. What happens if I withdraw EPF before 5 years?
EPF withdrawals before 5 years attract tax deductions and break the compounding cycle.
2. Is EPF withdrawal taxable?
- If withdrawn after 5 years, it’s tax-free.
- If withdrawn before 5 years, TDS applies unless certain conditions are met.
3. Can I get a loan against EPF?
Yes, loans against EPF are available under specific conditions such as home construction, education, and medical emergencies.
4. How can I transfer my EPF when changing jobs?
Use your UAN to log in to the EPFO portal, link your new employer, and request a transfer.
5. What is the latest EPF interest rate?
As per the latest EPFO notification, the interest rate is 8.15% for 2023-24.
