Through a provident fund (PF), you contribute a part of your salary each month towards the pension fund. The amount accumulates over a period of time and you get it as a lump sum upon retirement or at the end of the employment. Every setup with more than 20 employees or more has to offer PF to its employees.

Calculation of PF

PF contribution has to be made both by the employees and the employer. The contributions get accumulated in the provident fund in the name of the employee. The contribution of the employer is 12% of the basic wage plus dearness allowance or DA.

The employee makes an equal contribution. However, note that if you work in an organization, where the number of employees is less than 20, then under the rules of the rules of the Employees’ Provident Fund Organization (EPFO), the body which manages the scheme, the contribution of both the employee and the employer is restricted to 10%.

In most cases, for those working in the private sector, it’s the basic salary on which the contribution is computed. For instance, if your basic monthly salary is Rs. 30,000, then contribution by you and your employer would be Rs. 3,600 each (12% of basic).

Higher voluntary contribution

Note that you can make a higher contribution than the stipulated 12% of the basic pay. The contribution made comes under the ambit of Voluntary Provident Fund (VPF). However, in such a scenario, it’s not mandatory for the employer to make an equal voluntary contribution.

Incentive for women employees

In a bid to provide incentive to women employees and supplement their take-home salary, the Government of India in Budget 2018 brought down the contribution of the women employees to 8% during the first 3 years of their employment, as against 12% or 10% depending upon the establishment’s type.

However, there will be no change in the contribution of the employer. It will remain the same – 12% or 10%.

Online PF calculator

There are many online PF calculators that help you calculate your PF amount. On most PF calculators, you need to input details such as:
  • Your current age and the age when you want to retire
  • Your basic monthly salary and the average annual expected increase
  • You and your employee’s contribution and the applicable rate of interest, as confirmed by the administration
PF gives you a financial back up when you hang up your boots. It helps you meet post-retirement expenses with ease. Since PF is calculated on basic salary, take a close look at your salary structure to know the basic. The higher the basic, the greater is the accumulated corpus.

Click here to plan your retirement goals.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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