EPFO: At the age of 25, if your basic salary is Rs 15,000, it is crucial to understand the total amount that will be accumulated in your Employee Provident Fund (EPF) account by the time you retire. The EPF is regarded as one of the most secure retirement savings plans for salaried individuals in India, with contributions made monthly by both the employee and the employer. The government sets the interest rate for the EPF annually, which is currently at 8.25% per annum. The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organization (EPFO) is set to convene on February 28 to determine the EPF interest rate for the financial year 2024-25. Reports suggest that the interest rate may remain at 8.25% for this year, consistent with the rate for the financial year 2023-24. The CBT of the EPFO, which is the principal decision-making authority of the organization, is chaired by the Union Labour Minister and includes representatives from trade unions, central and state governments, as well as employees and employers.

In the EPF scheme, an employee can contribute up to 12% of their basic salary and dearness allowance (DA), with the employer matching this contribution. Of the employer’s contribution, 3.67% is allocated to the EPF, while the remaining 8.33% is directed towards the Employee Pension Scheme (EPS). To illustrate the potential accumulation for an individual with a basic salary of Rs 15,000, we will examine the EPF calculations.

If an individual begins employment at 25 years of age with a monthly basic salary of Rs 15,000, they will contribute 12% of their salary to the EPF. Assuming a 5% annual salary increment, this contribution will persist until the individual reaches the age of 60.

What will be the total amount accumulated by the age of 60 with a basic salary of Rs 15,000, factoring in a 5% annual increase?

Employee’s contribution (12%) = Rs 25,47,574

Employer’s EPF contribution (3.67%) = Rs 7,78,883

Employer’s EPS contribution (8.33%) = Rs 17,68,691

Total EPF contribution (employee + employer = 15.67%) = Rs 25,47,574

Interest on EPF (at 8.25% p.a. interest rate) = Rs 75,81,663.

Total balance (contribution + interest) = Rs 1,01,29,237