PF Account: Employed individuals recognize the significance of the Employees’ Provident Fund (EPF). Contributions from both the employer and employee build up over time in an EPF account, with interest being added annually. The EPF offers an annual interest rate of 8.25%, benefiting over 70 million subscribers across the country. If employees choose to boost their contributions, they could amass a corpus of Rs 80 lakh after about thirty years. Let’s break down the numbers.
How much is the contribution?
Typically, employees contribute 12% of their basic salary and dearness allowance (DA) (capped at Rs 15,000) to the EPF each month. The employer matches this with another 12%. Of the employer’s contribution, 3.67% goes into the EPF account, while the remaining 8.33% is allocated to the employee’s pension account, known as the EPS account.
What do experts say?
If you’re currently putting in around Rs 1,200 to your EPF monthly, you can raise this to Rs 5,000 via a Voluntary Provident Fund (VPF). Shreya Sharma, Founder and CEO of Rest The Case, shared with Mint, “VPF is not a separate account. It’s an extension of your EPF, allowing you to contribute voluntarily beyond the mandatory 12% and earn the same interest rate of 8.25% for FY 2025–26. It’s tax-free upon maturity and also qualifies for the additional 80C deduction benefit under the old tax regime.”
Understand with an example
Imagine two individuals each contributing Rs 5,000 to their EPF account at an 8.25% interest rate. If the first individual leaves their funds untouched for 30 years, they will accumulate a corpus of around Rs 80 lakh. In contrast, if the second individual withdraws their entire corpus every 10 years and restarts the process, they will only have a corpus of Rs 28 lakh. Shreya Sharma explains that this notable difference arises because the interest accrued over 20–30 years compounds on a larger accumulated base. Withdrawing and restarting each time diminishes that base, leading to compounding on a smaller amount.
The instant PF withdrawal service via UPI could be launched by the end of May 2026. This change is being implemented under EPFO’s new digital system, CITES 2.0.
You will get instant money through UPI
Currently, PF withdrawals take several days, but with the new system in place, this process will be significantly faster. EPFO members will be able to log in with their UAN, complete OTP verification, and instantly transfer funds directly to their bank accounts via UPI. This will eliminate lengthy processes and paperwork.
What is CITES 2.0 system?
CITES 2.0 is EPFO’s new digital platform, which aims to simplify, expedite, and make the entire process transparent. The old system will be replaced by a unified platform, reducing delays in claim processing and providing better convenience to users.