Your EPF can make your Crorepati! – PrognoAdvisor

Your EPF can make your Crorepati!

Employee Provident Fund or EPF is one of the main platforms of retirement savings plans for salaried class in India. Nearly all people working in Government, Public or Private sector Organizations subscribe to it. The employer and the employees need to contribute to the EPF from the monthly basic salary plus the dearness allowance towards EPF. The employees contributions are exempted from tax upto the limits set under section 80C and employer contributions are fully exempt irrespective of the value of contributions. The interest earned is also tax free. The returns are compounded. Interest rate on EPF is announced every year. In the past several decades, the interest rate has ranged from 8-12 % of the balances maintained in the fund. Currently it is at 8.5%p.a.

A youngster at 25 years of age with a current basic salary of Rs.12000 per month has the potential to grow this EPF balance to Rs.1.13 crores when he reaches 60 years of age! Isn’t it amazing?! Let us see how it works.

Aravind is 25 years now. His EFP contribution details are as provided below:

Assuming an interest rate of 8.5%p.a. for the entire period his contributions are expected to accumulate as shown in the chart below:

Year Opening Balance Basic Pay Yearly Contribution Company’s Contribution Total Contribution Closing Balance
1 ₹ 0 ₹ 12,000 ₹ 17,280 ₹ 10,788 ₹ 28,068 ₹ 30,454
2 ₹ 30,454 ₹ 12,600 ₹ 18,144 ₹ 11,652 ₹ 29,796 ₹ 65,371
3 ₹ 65,371 ₹ 13,230 ₹ 19,051 ₹ 12,559 ₹ 31,610 ₹ 1,05,225
4 ₹ 1,05,225 ₹ 13,892 ₹ 20,004 ₹ 13,512 ₹ 33,516 ₹ 1,50,533
5 ₹ 1,50,533 ₹ 14,586 ₹ 21,004 ₹ 14,512 ₹ 35,516 ₹ 2,01,863
6 ₹ 2,01,863 ₹ 15,315 ₹ 22,054 ₹ 15,562 ₹ 37,616 ₹ 2,59,835
7 ₹ 2,59,835 ₹ 16,081 ₹ 23,157 ₹ 16,665 ₹ 39,822 ₹ 3,25,128
8 ₹ 3,25,128 ₹ 16,885 ₹ 24,315 ₹ 17,823 ₹ 42,137 ₹ 3,98,483
9 ₹ 3,98,483 ₹ 17,729 ₹ 25,530 ₹ 19,038 ₹ 44,569 ₹ 4,80,711
10 ₹ 4,80,711 ₹ 18,616 ₹ 26,807 ₹ 20,315 ₹ 47,122 ₹ 5,72,699
11 ₹ 5,72,699 ₹ 19,547 ₹ 28,147 ₹ 21,655 ₹ 49,803 ₹ 6,75,414
12 ₹ 6,75,414 ₹ 20,524 ₹ 29,555 ₹ 23,063 ₹ 52,617 ₹ 7,89,914
13 ₹ 7,89,914 ₹ 21,550 ₹ 31,032 ₹ 24,540 ₹ 55,573 ₹ 9,17,353
14 ₹ 9,17,353 ₹ 22,628 ₹ 32,584 ₹ 26,092 ₹ 58,676 ₹ 10,58,992
15 ₹ 10,58,992 ₹ 23,759 ₹ 34,213 ₹ 27,721 ₹ 61,934 ₹ 12,16,205
16 ₹ 12,16,205 ₹ 24,947 ₹ 35,924 ₹ 29,432 ₹ 65,356 ₹ 13,90,493
17 ₹ 13,90,493 ₹ 26,194 ₹ 37,720 ₹ 31,228 ₹ 68,948 ₹ 15,83,494
18 ₹ 15,83,494 ₹ 27,504 ₹ 39,606 ₹ 33,114 ₹ 72,720 ₹ 17,96,992
19 ₹ 17,96,992 ₹ 28,879 ₹ 41,586 ₹ 35,094 ₹ 76,681 ₹ 20,32,935
20 ₹ 20,32,935 ₹ 30,323 ₹ 43,666 ₹ 37,174 ₹ 80,839 ₹ 22,93,446
21 ₹ 22,93,446 ₹ 31,840 ₹ 45,849 ₹ 39,357 ₹ 85,206 ₹ 25,80,837
22 ₹ 25,80,837 ₹ 33,432 ₹ 48,141 ₹ 41,649 ₹ 89,791 ₹ 28,97,631
23 ₹ 28,97,631 ₹ 35,103 ₹ 50,549 ₹ 44,057 ₹ 94,605 ₹ 32,46,576
24 ₹ 32,46,576 ₹ 36,858 ₹ 53,076 ₹ 46,584 ₹ 99,660 ₹ 36,30,666
25 ₹ 36,30,666 ₹ 38,701 ₹ 55,730 ₹ 49,238 ₹ 1,04,967 ₹ 40,53,163
26 ₹ 40,53,163 ₹ 40,636 ₹ 58,516 ₹ 52,024 ₹ 1,10,540 ₹ 45,17,618
27 ₹ 45,17,618 ₹ 42,668 ₹ 61,442 ₹ 54,950 ₹ 1,16,392 ₹ 50,27,901
28 ₹ 50,27,901 ₹ 44,801 ₹ 64,514 ₹ 58,022 ₹ 1,22,536 ₹ 55,88,224
29 ₹ 55,88,224 ₹ 47,042 ₹ 67,740 ₹ 61,248 ₹ 1,28,988 ₹ 62,03,175
30 ₹ 62,03,175 ₹ 49,394 ₹ 71,127 ₹ 64,635 ₹ 1,35,762 ₹ 68,77,746
31 ₹ 68,77,746 ₹ 51,863 ₹ 74,683 ₹ 68,191 ₹ 1,42,874 ₹ 76,17,373
32 ₹ 76,17,373 ₹ 54,456 ₹ 78,417 ₹ 71,925 ₹ 1,50,343 ₹ 84,27,972
33 ₹ 84,27,972 ₹ 57,179 ₹ 82,338 ₹ 75,846 ₹ 1,58,184 ₹ 93,15,979
34 ₹ 93,15,979 ₹ 60,038 ₹ 86,455 ₹ 79,963 ₹ 1,66,418 ₹ 102,88,401
35 ₹ 102,88,401 ₹ 63,040 ₹ 90,778 ₹ 84,286 ₹ 1,75,064 ₹ 113,52,860
Total     ₹ 15,60,735 ₹ 13,33,515 ₹ 28,94,250 ₹ 113,52,860

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