What is EPF?
The Employees' Provident Fund (EPF) is a retirement benefit scheme mandated by the Government of India. It ensures employees contribute a portion of their salary monthly, matched by the employer, and earns interest. Upon retirement or resignation, the accumulated fund helps ensure financial stability.
How EPF Contributions & Interest Work
Typically, 12% of an employee's basic salary is contributed to EPF monthly, with a matching contribution by the employer. The contributions earn interest annually, currently at a rate decided by EPFO. The interest is compounded annually and credited at the end of the financial year.
How We Calculate EPF
We use the standard EPF calculation model as defined by the EPFO. For each year:
- We sum both employee and employer monthly contributions (typically 12% each of basic salary)
- We apply annual interest (entered by the user) on the accumulated balance
- Interest is compounded yearly and added at year-end
- The result is a year-by-year growth of the EPF corpus over the specified period
For example, if your basic salary is Rs. 20,000 per month:
- Employee contribution = Rs. 2,400/month
- Employer contribution = Rs. 2,400/month
- Total annual contribution = Rs. 2,400 x 2 x 12 = Rs. 57,600
- Assuming 8% annual interest, interest earned = Rs. 57,600 x 8% = Rs. 4,608
- Year-end EPF balance = Rs. 57,600 + Rs. 4,608 = Rs. 62,208
Benefits of EPF
- Long-term retirement savings with compounded interest
- Employer also contributes, doubling the savings impact
- Partial withdrawals allowed for emergencies
- Tax benefits under Section 80C
- Safe and government-backed scheme
How to Use the EPF Calculator
To estimate your EPF maturity value, enter your basic monthly salary, employee and employer contribution percentages, expected annual interest rate, and the number of years you plan to invest. The calculator shows your maturity amount and interest earned.
Frequently Asked Questions (FAQs)
What is EPF?
EPF is a mandatory savings scheme for salaried employees where both employer and employee contribute monthly. It helps build a retirement corpus over time.
How is EPF interest calculated?
The annual interest rate declared by EPFO is applied to the closing balance of each year. Interest is compounded annually and added to the corpus at the end of the financial year.
Can I withdraw EPF before retirement?
Yes, partial withdrawals are allowed for specific needs. Full withdrawal can be done at retirement or after 2 months of unemployment.
Is EPF tax-free?
Yes, contributions, interest, and maturity amounts are tax-free under the Exempt-Exempt-Exempt (EEE) provision, subject to certain conditions.