Employees' Provident Fund: Earn up to Rs 1.5 crore from monthly contributions to EPF - Details inside

When you receive your salary at the end of each month, it must be a little frustrating to see so many deductions being made. However, fret not, as all this money that is being deducted from your account right now will only help you get a significant amount once you decide it is time to retire. 

This assurance is given with all monthly contributions that you make to the Employees’ Provident Fund (EPF). Once you understand the compounding rule, it is easier to see how you will be due to receive a lump sum amount when you retire. 

According to the latest EPF update, as reported by India.com, the EPF fund carries an interest rate of 8.5 percent for the year 2020-21. This interest rate is way higher than what banks offer their customers on fixed deposits (FDs) and other government-related schemes. 

If you apply the EPF interest rate of 8.5 percent to a person with a basic salary of Rs 25,000 a month then he/she can gain a huge amount of Rs 1.65 crore in 35 years. It is important to note that the interest received on EPF deposits is also tax-free. 

How can you earn up to Rs 1.5 crore on retirement? 

The first thing one can make sure of is that one should never withdraw from their EPF account till they retire. Notably, if you withdraw the money from the EPF within 5 years of your joining that that amount is taxable.

For this, one can make sure that when they change a job from one company to another, they transfer their PF balance to the new company's account and continue saving. 

Chief Executive Officer of Finology, Pranjal Kamra, while speaking to News 18 said that the average inflation, in the longer period, is around 6 percent while EPF gives returns of 8.5 percent in the country. 

Kamra stressed the fact that EPF is an important investment avenue for employees who earn salaries and it does help, not only in beating inflation but to also save enough for retirement.