Sign In
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
Kolkata: Becoming a crorepati is a common aspiration for the Indian middle class. Many investment strategies are available on how to net a cool crore through disciplines investing in mutual funds or equities. However, did you know that tucked away in an obscure corner of your financial landscape is a tool, that too a statutory one, which keeps working imperceptibly to multiply your wealth? It can net you a cool crore even with a humble contribution every month -- a veritable "SIP" that the law forces you to do -- by the time you retire.
Sounds incredible? Look closure at your salary clip, where you will find your contribution to EPF or the Employees' Provident Fund. This amount is deducted every month from your salary and put in the EPF account, a humble subhead in your salary slip which perhaps finds no place in your mental map which is crowded by equity, mutual funds, gold, real estate and even cryptocurrency -- the poster boys of modern day investing. But then have a look at what EPF can do for you, literally behind your back as you slog at your workplace.
The most important point about EPF is that it does not wait for your green light to invest. The contributions start without your consent and they start when your begin your career. For example, let's consider a youth who graduates at 21/22 and starts working. Let's also assume for our calculations that he/she will continue working till he/she turns 58. Also consider the first basic salary be Rs 12,000, which will rise every year due to salary increments. The interest rate paid by EPF every year is assumed to be 8.25%, which has been the rate in FY24 and FY25.
Let's assume that this person gets salary hikes at the average of 6% throughout his/her career which spans from 22 to 58 years. Under these conditions, the person will amass a cool Rs 1,17,06,741, or Rs 1.17 crore by the time he/she turns 58.
Even if the person gets a salary hike of 5%, the amount in the EPF account at the time of retirement will be Rs 98,06,116, or more than Rs 98 lakh. An increment of 5.5% will turn the EPF corpus into Rs 1,07,08,494 or Rs 1.07 crore. These calcualtions can be easily done with the help on an online EPF calculator.
EPF was legislated in 1952. It was probably the first social safety net for employees of the formal sector in India. It is so useful that is has flourished even as the financial tools for the middle-class Indians went through a transformation since the inauguration of the economic reforms in the early nineties. EPF takes 12% contribution from the Basic + DA from the salary of an employee and 3.67% from the employer in order to amass a corpus for the post-retirement life of an employee and his/her family.
Incidentaly, EPFO (Employees' Provident Fund Organisation) also pays a monthly pension called EPS when an employee retires. While the EPF amount is paid as a lumpsum to the employee, EPS guarantees a regular cash flow.
