The tragedy of life of most Indian employees income stops at 58 but expenditure never stops. The Employees’ Provident Fund, or EPF, was designed to take care of the post-retirement expenditure of an employee and his/her family. An amount of 12% of the employee’s basic + DA is deducted from his/her earnings and deposited in the EPF account. So is 3.67% of the employer’s contribution.
One significant feature of the EPF is that even if an employee begins with a modest basic salary (+DA), one can hope to build a healthy corpus in the EPF if the employee is recognised as a ‘performer’ at the workplace and manages to secure a good increment during the working life. A simple calculation using the online EPF calculator will demonstrate this.
How can I calculate my EPF account
One can do easily get an idea of the amount that will be amassed in the EPF account using an online EPF calculator. Let a youth begin earning at the age of 25. Let his/her initial basic salary (+ DA) be Rs 10,000, a modest amount these days. But let’s assume the employee will be recognised as a ‘performer’ and will wrest an average increment of 12% throughout the career. With these assumptions, the employee can look forward to an amount of Rs 2,04,00,604 (or Rs 2.04 crore) at the age of 58. This amount will be handed over to him/her at the age of 58.
What is the purpose of EPF account
The purpose of an EPF account is to safeguard the financial future of an employee after retirement. Continuing the above example of a ‘performer’ employee, let’s see what the final corpus with a 10% annual salary increment will be. The EPF calculator shows this amount will be Rs 1,40,75,555 or Rs 1.40 crore. If one can get an average of 11% increment, the final EPF corpus will be Rs 1,69,22,354 or Rs 1.69 crore. One must remember that besides the lumpsum amount, every employee will get a monthly pension from the age of 58.
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