The Employees' Provident Fund (EPF) is a retirement savings scheme in India that requires both employers and employees to make contributions. To help individuals better understand their contributions and withdrawals, an EPF calculator is an essential tool.
Overview on EPF Scheme and EPF Calculator:
The Employee Provident Fund (EPF) is a popular retirement benefits scheme in India that provides financial security to employees after their retirement. It is a government-regulated fund that requires both employees and employers to make contributions towards it. However, calculating the contributions and withdrawals from an EPF account can be a complex task, especially for those who are new to the system. This is where an EPF calculator comes in handy. We at Vakilsearch have provided general information on the basics of EPF contributions and withdrawals, and how an EPF calculator can help you calculate them better.
What is EPF Contributions?
Employers and employees both contribute towards the EPF account, and the contribution is a percentage of the employee’s basic salary, including dearness allowance and retention allowance. As of 2023, the employer’s contribution is 12% of the employee’s basic salary, and the employee’s contribution is also 12% of their basic salary. However, there are certain rules and limitations to these contributions.
Employer’s Contribution
As mentioned earlier, the employer’s contribution is 12% of the employee’s basic salary, including dearness allowance and retention allowance. However, the employer’s contribution is limited to a maximum wage of ₹15,000 per year. This means that even if the employee’s basic salary is more than ₹15,000 per month, the employer’s contribution is calculated only on the maximum wage of ₹15,000 per year.
The employee’s contribution is also 12% of their basic salary, including dearness allowance and retention allowance. Unlike the employer’s contribution, there is no limit on the employee’s contribution. However, employees can choose to contribute more than the mandated 12% of their basic salary, which is known as the Voluntary Provident Fund (VPF).
Voluntary Provident Fund (VPF)
VPF is a scheme that allows employees to contribute more than the mandated 12% towards their EPF account. The contribution towards VPF is entirely voluntary, and employees can choose to contribute any amount they wish. The interest rate earned on VPF contributions is the same as that earned on EPF contributions. However, the maximum amount that an employee can contribute towards VPF is subject to their total basic salary, including dearness allowance and retention allowance.
What are EPF Withdrawals?
EPF withdrawals can be made under various circumstances, such as retirement, resignation, or termination of employment. However, there are specific rules and limitations for each of these circumstances. Let’s understand them in detail.
Retirement
When an employee retires, they can withdraw the entire amount from their EPF account, including the accumulated interest. However, the employee must have completed a minimum of ten years of service to be eligible for this withdrawal. If the employee has not completed ten years of service, they can still withdraw the entire contribution made by them towards the EPF account, but not the accumulated interest.
Resignation or Termination
If an employee resigns or is terminated before completing five years of service, they can withdraw only their contribution made towards the EPF account, along with the accumulated interest. However, if the employee has completed five years of service, they can withdraw the entire contribution made by them towards the EPF account, including the accumulated interest.
Advantages of EPF in India
Retirement Savings: The primary benefit of EPF is that it provides employees with a means to save for retirement. Both employers and employees contribute to the fund, which accrues interest over time. This helps employees build a substantial retirement corpus that they can use to support themselves after they retire.
Tax Benefits: EPF contributions are eligible for tax deductions under Section 80C of the Income Tax Act. This means that employees can reduce their taxable income by up to Rs. 1.5 lakhs by contributing to their EPF account.
Liquidity: While EPF is primarily designed as a long-term retirement savings scheme, it also offers some liquidity. Employees can withdraw their EPF savings in certain circumstances, such as medical emergencies, home purchases, or marriage.
Disability and Death Benefits: In the event of the employee’s death, their nominated beneficiaries will receive the full amount in their EPF account. Additionally, employees who become disabled are eligible for disability benefits from their EPF account.
Insurance Benefits: EPF also provides life insurance benefits to employees. The insurance coverage is provided through the Employees’ Deposit Linked Insurance Scheme (EDLI) and is equal to 20 times the employee’s salary.
Estimate the maturity amount of your provident fund with our PF maturity calculator. Our EPF calculator India provides the latest updates.
Using Vakilsearch EPF Calculator to Calculate Your Retirement Fund
Here is how to use an EPF calculator to calculate your retirement funds:
- Firstly, enter the current age and expected retirement age, not exceeding 58 years, in the appropriate fields.
- In Step 2, provide the basic monthly wage and the anticipated average annual increase in basic salary.
- Step 3 involves providing the total contributions made by both the employee and employer.
- Lastly, input the interest rate applied to the EPF balance, which is determined by the government. The EPF calculation formula computes the information using the given inputs and returns the result.
EPF Contribution used in EPF Calculator 2023
| Category | % Of Contribution |
| Employees Provident Fund | 3.67 % |
| Employee’s Deposit Link Insurance Scheme (EDLIS) | 0.5 % |
| EDLIS Admin Charges | 1.1 % |
| Employee Pension Scheme (EPS) | 0.01 % |
| EPF Admin Charges | 8.33 % |
Conclusion – Basics EPF Contributions and Withdrawals
In conclusion, the Employees’ Provident Fund (EPF) is a valuable savings scheme that offers a range of benefits to employees in India. By contributing to the EPF account, employees can build a substantial retirement corpus, reduce their taxable income, and access liquidity in certain circumstances. The EPF account also provides disability, death, and insurance benefits, making it a comprehensive savings scheme for employees. Overall, EPF is an important tool for individuals who want to plan for their financial future and ensure that they have adequate savings for their retirement. For more information on EPF schemes and to use Vakilsearch’s free EPF calculator, get in touch with our Vakilsearch experts.
Read More:
