Magic of Compounding: EPF interest calculation; what should be your monthly contribution to create Rs 1.5 cr, Rs 2.5 cr, or Rs 3.5 cr tax-free retirement corpus

EPF Retirement Corpus Calculator: Employees' Provident Fund (EPF) is a retirement scheme where private sector employees get a fixed interest rate. It is one of the few schemes where the invested amount up to Rs 1.50 lakh in a financial year, the interest earned, and the maturity amount are tax-free.

If one invests consistently in EPF without taking many breaks in their job, they can create a large tax-free corpus.

Even from the diversification point of view, EPF can form a powerful debt portion of one's investment portfolio. 

How does EPF work?

An employee with a basic salary of at least Rs 15,000 can start contributing to EPF.

They can contribute a minimum of Rs 1,800 every month.

The maximum amount that they can contribute is 12 per cent of their basic salary and dearness allowance (DA).

If they want, they can contribute more than 12 per cent, but that would be counted as their Voluntary Provident Fund (VPF).

They won't get tax benefits on additional contributions and the additional corpus built because of that.

EPF subscribers get 8.25 per cent compound interest. This finance ministry can revise this rate. 

The special thing about EPF is that the employer also contributes an equal amount to the employer's account.

From the employer's side, a 3.67 per cent contribution goes to the employee's EPF account, and the remaining 8.33 per cent goes to their Employees' Pension Scheme (EPS).

The EPS contribution helps them get monthly pension at the retirement age of 58, or in certain conditions, prior to that.

The overall contribution with years of compounding can help one generate a retirement corpus that can help them attain or maintain financial freedom in their retirement days.   

EPF calculation conditions

The investment duration will be 35 years (from 25 years of age to 60 years) and the monthly contribution will remain the same from the beginning to the end.

EPF Retirement Corpus Calculation: Monthly EPF contribution to get Rs 1.5 cr corpus

The monthly contribution in such a case will be Rs 6,340.

The overall EPF contribution in 35 years will be Rs 26,62,800, and the estimated EPF retirement corpus will be Rs 1,50,05,465.25.

EPF Retirement Corpus Calculation: Monthly EPF contribution to get Rs 2.5 cr corpus

The monthly contribution in such a case will be Rs 10,570.

The overall EPF contribution in 35 years will be Rs 44,39,400, and the estimated EPF retirement corpus will be Rs 2,50,16,998.06.

EPF Retirement Corpus Calculation: Monthly EPF contribution to get Rs 3.5 cr corpus

The monthly contribution in such a case will be Rs 14,790.

The EPF contribution in 35 years will be Rs 62,11,800, and the estimated EPF retirement corpus will be Rs 3,50,04,862.95.