What is EPF?

Background

EPF (Employee Provident Fund) is a government-backed retirement savings scheme for employees in organised sectors in India, managed by the EPFO. Both you and your employer contribute a percentage of your basic salary every month.

Explanation

Typically, 12% of your basic salary goes from you into EPF and your employer contributes another 12% (split between EPF and EPS). The balance earns interest declared by the government each year and compounds until withdrawal. EPF contributions qualify for tax deductions and, subject to rules, the maturity amount is tax-efficient, making EPF a core retirement pillar.

Example

If your basic salary is ₹50,000, your own 12% contribution is ₹6,000 per month, with a similar employer contribution. Over 25–30 years, this monthly saving can grow into a sizeable corpus that supplements NPS, PPF and mutual fund investments in retirement.

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