Retirement planning is important for the financial well-being of a person. It helps ensure you spend your retirement days without worry and stress.
Two popular savings instruments in India that meet this purpose are the Public Provident Fund (PPF) and the Employees’ Provident Fund (EPF).
In this article, we will explore these instructions in detail, focusing on the PPF and EPF calculator.
Understand EPF and PPF
EPF, or Employees’ Provident Fund, is a government savings scheme for employees. Employees Provident Fund Organisation (EPFO) declares the interest rate on an annual basis. EPF is mandatory for all employees and acts as a savings plan.
An employer deposits a certain percentage of an employee’s salary for PF and matches the same sum as an employer contribution. This helps ensure enough money for the employees when they retire.
On the other hand, PPF or Public Provident Fund is meant for all employed, self-employed, unemployed, or retired individuals. It also falls under the Indian government.
This scheme is not mandatory like EPF. Anyone can contribute from Rs 500 to a maximum of Rs 1.5 lakh annually. You can easily open a PPF account with the post office or major banks. The current PPF account interest rate is 7.10% p.a.
Comparison Table: EPF Calculator vs. PPF Calculator
| Aspect | EPF Calculator | PPF Calculator |
| Eligibility | Salaried Employees | All Indian Citizens |
| Type | Mandatory | Voluntary |
| Employer Contribution | 12% of Basic Salary | No |
| Employee Contribution | 12% of Basic Salary | Voluntary, Up to ₹1.5 lakh per year |
| Tax Benefits | Exempt | Exempt |
| Maturity Period | Until Retirement or Job Change | 15 Years |
| Liquidity | Partial Withdrawals Allowed | Limited Withdrawals Allowed |
| Loan | Available for Specific Purposes | Available After 3 Years |
| Risk Tolerance | Low | Low |
Now that you know the basics, by using an EPF and PPF calculator, you can calculate your retirement savings and make good decisions. Let’s discuss that part now.
Online EPF Calculator
Let’s consider example to illustrate how an online EPF calculator works:
Suppose an employee at Company ABC has a monthly basic salary and dearness allowance totaling ₹20,000. The employee’s contribution to the EPF is 12%, amounting to ₹2,400. The employer contributes 3.67%, which is ₹734. The employer also contributes ₹1,666 towards the EPS.
So, the total monthly contribution = ₹3,134 (2,400 + 734).
Now, let us assume an interest rate of 8.5% for FY 2023-24. The monthly interest rate will be 8.5%/12 = 0.70833%.
If the employee joined in June 2020, the EPF contribution for June would be ₹3,134, with no interest credited. For July, the total contribution would be ₹6,268 (₹3,134 + ₹3,134). The interest earned would be ₹44.38 (₹6,268 * 0.70833%).
This process continues for subsequent months.
Online PPF Calculator
You can easily find out how much money you’ll get from your PPF account using an online PPF calculator.
It considers your investment and the PPF period to estimate the final amount accurately. The interest is added every year.
The interest in PPF is calculated using this formula:
F = P[{(1+i)n-1}/i] where,
F is the maturity amount of the PPF
P is the annual installment paid
n is the number of years or tenure of the PPF
i is the rate of interest.
Let’s consider an example using a PPF calculator:
Suppose an individual invests ₹50,000 annually in their Public Provident Fund for 20 years, and the current interest rate is 8.5%. Using a PPF calculator, the estimated maturity amount at the end of the 20 years would be ₹18,28,163. The calculator factors in the yearly interest compounding, providing a clear picture of the potential savings over time.
Conclusion
Choosing between the EPF and PPF calculator for your retirement savings depends on your financial circumstances and goals. Your choice may also depend on whether you are a salaried employee with access to EPF or a self-employed individual who can opt for PPF. You can easily decode your EPF or PPF savings using the EPF or PPF calculator. It’s easy to use and will give you quick results.