The Employees’ Provident Fund, or EPF, is the oldest workhorse of the Indian organised sector in so far as the significant task of building a sizeable corpus to be used in post-retirement years for every employee and his/her family with monthly contributions from both the employee and the employer. It takes 12% of the basic + DA of the employee and a matching amount from the employer and creates a lump sum as well as organises a monthly pension, known as EPS (Employees Pension Scheme) that is payable from the age of 58 of the employees.
It is natural to think that the size of the corpus will depend on how big the basic + DA amount of the employee is. Indeed, the bigger the basic + DA amount of an employee, the bigger the contribution to the EPF account and eventually the bigger the ultimate corpus that is payable to the employee at the time of retirement. However, that does not mean that if an employee gets a smaller salary, the amount in the EPF corpus would be insignificant. The apparently contradictory reason: EPF works on the power of long-term compounding and an average employee works well over 30 years for this effect to play out. Let’s check the calculations with an EPF calculator.
How can I calculate my EPF amount: Basic 5000
Let’s assume a person begins working at the age of 23. He/she becomes a graduate at 21/22 and takes 1 year to get a job. Let’s also assume he/she gets a meagre basic salary + DA of Rs 5,000. Assuming he/she works till 58, the amount that will be created in the EPF account is more than Rs 32 lakh (Rs 32,46,092). The EPF passbook will show you how the amounts is rising every year.
EPF calculations with basic salary of Rs 8000 and Rs 10000
If the starting salary + DA is Rs 8,000, the final corpus will stand at Rs 55,06,496. And if the initial basic salary + DA becomes Rs 10,000, the final corpus in the EPF account will come to Rs 71,49,575. If each instance, we have assumed a small rate of salary increment (5%). We have also assumed that the rate of interest remains at 8.25% — the rate the EPFO (Employees Provident Fund Organisation) paid for FY24. You can keep watching the EPF passbook whether the amounts are being deposited regularly.
