Employee Provident Fund (EPF) is a savings scheme designed for employees. In this, both employers and employees contribute a fixed amount of the employee’s salary. It is managed by the Employees’ Provident Fund Organisation (EPFO). The mandatory contribution in this scheme is 12 per cent of the basic salary plus dearness allowance.
Employees contribute a full 12 per cent to the EPF account, while employers only contribute 3.67 per cent of employees’ salary in EPF account while rest 8.33 per cent is diverted to the Employees’ Pension Scheme (EPS) to provide a monthly pension to the employee after their retirement. On the accumulated fund, the government provides an 8.25 per cent interest rate. However, this interest rate is subject to change once a year. The interest and contributions on EPF are tax-free.
For EPF contribution, every member gets a Universal Account Number (UAN).
In this article, we will calculate how an EPFO member can create a Rs 2 crore retirement corpus on a basic salary of Rs 27,700 per month. But before that, let’s check out other important things as well.
What are the EPF withdrawal rules?
You can withdraw your EPF on retirement, resignation, or unemployment, for emergency needs, and other purposes.
When can you get tax benefits on EPF?
You can take the tax benefits if the EPF is withdrawn after five years of continuous service.
What is UAN in EPF?
A UAN, or universal account number, is a 12-digit number that is given to all EPFO members. Every employee has a different UAN.
Documents required for PF withdrawal
- UAN (Universal Account Number)
- Identity and address proof
- Bank account details of the EPF subscriber
- Cancelled cheque with IFSC code and account number
Eligibility
For any registered organisation in India that employs 20 or more people, EPF is mandatory. Employees whose basic salary is up to Rs 15,000 are eligible for EPF.
How to make a Rs 2 crore retirement corpus with a Rs 27,700 basic salary?
If your monthly basic salary is Rs 27,700 per month and you start investing at 25 years of age, then you can accumulate a fund of Rs 2,00,59,340 at retirement, calculations show.
Calculations for accumulating a Rs 2 crore fund
On a yearly hike of five per cent in salary, you can invest Rs 49,91,779 starting at 25 till retirement. On this, you will get an interest of Rs 1,50,67,561 at an 8.25 per cent annual rate. The total maturity amount will be Rs 2,18,43,497.
Total years of investment
As per the above calculation, you will have to invest for around 35 years to make a corpus of more than Rs 2 crore.
