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The Employees’ Provident Fund (EPF) plan remains one of the most dependable ways to accumulate a sizeable retirement fund in India.
Employees contribute 12% of their base pay + dearness allowance. (Representative Image)
The Employees’ Provident Fund (EPF) remains one of the most trustworthy retirement options for the working class in India. Regular contributions to the government-backed fund can help build a retirement fund of about Rs 2.5 crores in a span of 35 years, even with a meagre monthly salary of Rs 50,000.
The scheme is a pillar of long-term financial security free from market volatility due to the power of compounding, employer matching, and yearly wage increases. The Employees’ Provident Fund Organisation oversees the EPF, which requires contributions from employers and employees alike to guarantee steady retirement savings over the course of an employee’s career.
How Contributions Build the Corpus
Employees contribute 12 per cent of their base pay + dearness allowance (DA) under EPF regulations, with an equivalent employer contribution matching this amount. However, the employer’s share is split:
- 33 per cent goes to the Employees’ Pension Scheme (EPS)
- 67 per cent goes to the EPF account
For a Rs 50,000 basic salary:
- Employee contribution: 12 per cent of Rs 50,000 = Rs 6,000 per month
- Employer contribution to EPF: Also 12 per cent (Rs 6,000)
- 33 per cent goes towards the Employees’ Pension Scheme (EPS), with a monthly cap of Rs 1,250.
- Balance: 3.67 per cent or Rs 4,750 in this case
- Total EPF monthly contribution: Rs 6,000 + Rs 4,750 (employer’s) = Rs 10,750
This steady inflow forms the foundation of long-term wealth accumulation.
Power of Compounding Over 35 Years
Considering a 35-year career and an EPF interest rate of 8.25 per cent, the numbers become striking:
- Total investment: Rs 45.15 lakh
- Monthly contribution: Rs 10,750
- Returns: 8.25 per cent per annum (current interest rate)
- Estimated returns: Rs 2.09 crore
- Maturity corpus: approximately Rs 2.54 crore
Role of Salary Hikes in Corpus Growth
The compounding effect converts small monthly payments into a sizable corpus, with an annual wage increase of 6–8 per cent over a 30–35-year career (beginning at age 25–30 and retiring at age 58–60).
Your basic salary increases as you grow in your chosen career. With an annual salary increase of 10 per cent, your monthly contribution will not be the same as Rs 6,000. The interest on EPF is calculated every month and paid annually, which helps “interest on interest” to facilitate development, especially in the coming years.
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Delhi, India, India
February 20, 2026, 16:43 IST
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