HaatBeatHow it's calculated
Contribution each month = salary × (your % + employer's EPF %)
Interest for the year = Σ balance before each month × rate ÷ 12, added at year end
Salary rises once a year by the increase you enter. Interest is worked out on the running balance month by month and added once a year, so it compounds yearly.
Assumptions
- The same rate every year; the real rate is declared each year.
- Your share is usually 12% of basic salary. Of the employer's 12%, part goes to the pension scheme, which is not included.
- No withdrawals, and tax is not included.
Worked example
A basic salary of 50,000 rupees a month rising 5% a year, with 12% plus 3.67% contributed, at 8.25% for 25 years could reach about 1,16,17,898 rupees.
Questions
Why does only 3.67% of the employer's share go to EPF?
Usually 8.33% of salary, up to a wage limit, goes to the Employees' Pension Scheme instead. If your salary is above that limit, check your payslip for the real split.
Is EPF interest added monthly?
It is worked out on the monthly running balance but added to the account once a year.
Can I contribute more than 12%?
Yes, through the Voluntary Provident Fund. Raise your contribution to see the effect.
Sources
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