What Is EPF?
Employee Provident Fund (EPF) is a retirement savings scheme for salaried employees in establishments covered under the EPF Act. Both you and your employer contribute 12% of Basic + DA. Your contribution is deducted from salary; the employer's 12% is split: 8.33% goes to EPS (pension) and the rest to your EPF account. EPF offers tax-free, government-backed returns (currently ~8.15% p.a.) and is one of the safest long-term options. This guide explains how EPF works, the calculation, and how to use our EPF Calculator to project your retirement corpus.
Key Takeaways
- 12% each: You + employer on Basic+DA; employer 8.33% to EPS, rest to EPF
- 8.15% p.a.: Current interest; compound growth over career
- 80C + tax-free: Contribution deductible; interest and withdrawal (after 5 yr) tax-free
- VPF option: Extra voluntary contribution; same interest
- Use calculator: Project balance with salary growth and tenure
How EPF Works
- Employee: 12% of Basic+DA; deducted from salary; no cap
- Employer: 12% of Basic+DA; 8.33% to EPS (cap ₹1,250 on ₹15,000), 3.67%+ to EPF
- Interest: Calculated monthly, credited annually; ~8.15% p.a.
- Tax: 80C on contribution; interest tax-free; withdrawal after 5 yr tax-free
- VPF: Optional extra contribution up to 100% of Basic+DA; employer need not match
EPF Calculation Formula
Example: 25-Year Projection
📊 Starting Basic+DA ₹40,000, 8% salary growth, 8.15% return
Benefits of EPF
- Guaranteed return: Government-backed; no market risk
- Employer match: Free money; 3.67%+ from employer
- Tax efficiency: 80C, tax-free interest, tax-free withdrawal after 5 years
- Discipline: Automatic deduction; no need to remember
- Loan against EPF: Can use for housing, education; check EPFO rules
When to Use the EPF Calculator
Use the EPF Calculator when planning retirement, comparing job offers (higher Basic = more EPF), or deciding on VPF. Enter current Basic+DA, expected annual salary growth, and years to retirement. The calculator projects your corpus. Factor in inflation; ₹1 Cr in 25 years may have lower purchasing power. Use with our Retirement Planner to see how EPF fits with NPS, PPF, and other savings.
Transfer, Don't Withdraw
When changing jobs, transfer EPF to the new employer; don't withdraw. Withdrawal before 5 years is taxable and you lose compounding. Use UAN for seamless transfer. Each transfer keeps your balance growing. Many employees withdraw to use the money; that's a costly mistake for long-term wealth.
Using Our EPF Calculator
Our EPF Calculator lets you enter Basic+DA, salary growth rate, and years to retirement. It shows month-wise contribution, annual balance, and final corpus. Use it for retirement planning and to understand the impact of salary increments on your EPF.
Disclaimer
Interest rate and rules may change. Verify with EPFO and employer. Calculations are indicative.