Most private sector employees are entitled to receive post-retirement benefits if they function in the organised sector. Note that government employees are additionally eligible for pensions unlike their private sector counterparts. Employee Provident Fund was set up after the EPF Act was passed in the Parliament. Under the law, the Employees Provident Fund Organisation of India (or EFPO) controls the funds deposited by both the employee and employer in a permanent account, affixed by an UAN or Unique Account Number.
What is EPF?
The Employee Provident Fund or the EPF is a retirement benefits scheme for salaried employees in the private sector. The Employees Provident Fund Organisation (EPFO) manages the EPF. Any organisation or firm with 20 or more employees gets covered under the EPFO. The Employees Provident Fund Organisation operates three schemes.
- The EPF Scheme 1952
- The Pension Scheme 1995
- The Insurance Scheme 1976.
The employees who fall under the EPF scheme make a fixed contribution of 12% of the basic salary and the dearness allowance towards the scheme. The employer should also make an equal contribution to the EPF scheme. The EPFO Central Board of Trustees fixes the EPF interest rates every financial year after consulting the Ministry of Finance. The EPF Interest Rate for Financial Year 2023-24 is 8.25%.
The employee would get a lump-sum amount at retirement, which includes the contributions of both the employee and the employer with the interest payments. However, 12% of the employer contribution does not go to the EPF account. Out of the 12% contribution, 8.33% goes towards the Employee Pension Scheme Account, and the remaining 3.67% goes to the employee EPF account.
It is compulsory for all employees who draw a basic salary of less than Rs 15,000 per month to become members of the EPF. You cannot opt-out of the EPF scheme once you become a scheme member. An employee can make an enhanced contribution up to a maximum of 100% of the basic salary to the voluntary provident fund. The employer will not match the contribution.
What is EPF Calculator?
The EPF calculator is an online financial tool that calculates the total PF amount or maturity amount you will receive after retirement from your employment. This maturity amount will include both your and your employer’s contributions and the interest credited to your account. The data required to calculate your PF amount is as follows:
- PF contribution/ investment month every month, quarter, half-year or yearly
- PF interest rate
- Duration of contribution
- Frequency of EPF contribution
Formula to Calculate EPF Amount
To understand how to calculate EPF, let us have an example.
- Employee basic salary + dearness allowance = Rs 14,000
- Employee contribution towards the EPF = 12% * 14,000 = Rs 1,680
- Employer contribution towards the EPF = 3.67% * 14,000 = Rs 514
- Employer contribution towards EPS = 8.33% * 14,000 = Rs 1,166.
- The total contribution by the employer and employee towards the EPF account of the employee = Rs 1,680 + Rs 514 = Rs 2,194.
- Now with the Applicable interest rate 8.25% p.a, the monthly earned interest will be; 8.25%/12 = 0.679%
Assuming the employee joined the Firm XYZ in April 2019. The total EPF contribution for April will be Rs 2,194. The EPF scheme will not pay any interest for April. The total amount in EPF account May 2019 = Rs 4,388 (Rs 2,194+ Rs 2,194). He receives an interest of Rs 4,388 * 0.679% = Rs 29.79.
The formula to determine EPF amount
When you use Groww’s EPF calculator in India, you are assured of quality and reliability. This is the data you should keep in handy before you use the calculator.
| Your basic monthly salary including Dearness Allowance (DA) |
| Your contribution to the EPF |
| Your employer’s contribution |
| Your retirement age (Including VRS, if you have such plans.) |
| Your current EPF balance |
| Current EPF interest rate |
How can PF Calculator help you?
- Financial Planning Support: A PF calculator aids salaried individuals in planning their retirement by providing a clear view of their projected Provident Fund (PF) balance at retirement, helping them understand how much they need to save monthly to meet their financial goals.
- Effortless Tracking: It automates the calculation of total contributions and interest accrued over time, eliminating the hassle of manual calculations and ensuring accuracy in the tracking of their retirement savings.
- Immediate Updates: Salaried users receive immediate updates on any changes in PF policies, such as adjustments in interest rates or contribution ratios, enabling them to make informed decisions about their investments and savings strategy.
FAQs
What is a PF Calculator?
A PF (Provident Fund) calculator is an online tool that helps employees estimate the amount of money they will accumulate in their Provident Fund over time. It considers contributions made by both the employee and the employer, the interest rate, and the duration of the contribution to calculate the total PF balance.
When can I withdraw the money from my EPF account?
You can only withdraw the money for personal purposes:
- After you have completed 7 years of service
- Only thrice during the EPF account’s duration.