Ever puzzled how a lot time it is going to take you to build up ₹1 crore by investing both in Public Provident Fund (PPF) or Employee Provident Fund (EPF).
If the contribution is similar in the direction of each, you could possibly attain the ₹1 crore corpus sooner with PPF even when EPF provides increased rates of interest.
An particular person can make investments as much as ₹1.5 lakh in PPF every year, and it provides an rate of interest of seven.1%, the bottom in over 40 years. Let’s take a look at what number of years it is going to take to succeed in a corpus of ₹1 core by PPF.
As the rates of interest should not fixed for each, let’s take a look at the calculations based mostly on the latest charges. If you make investments ₹1.5 lakh this 12 months and maintain including the identical quantity yearly, it is going to take round 25 years to build up a corpus of ₹1 crore at a mean 7.1% rate of interest.
Things work just a little totally different with regards to EPF. In this scheme, there isn’t any cap on investments – it is a operate of wage. As your fundamental wage grows, so will your investments in the direction of EPF.
According to reviews, staff’ EPF funding for the final monetary 12 months will fetch 8.5%. Suppose an worker has a fundamental month-to-month earnings of ₹50,000. The contribution in the direction of EPF might be ₹72,000 a 12 months by every worker and employer, which is 12% of the fundamental earnings for every.
However, whereas the whole ₹72,000 will go in the direction of funding from the worker’s contribution, the identical is just not true for the employer. Of the employer’s contribution, 8.33% will go in the direction of the Employee’s Pension Scheme, and solely 3.67% will go in the direction of funding. So, the employer’s contribution might be ₹22,020 a 12 months.
If the rate of interest and contribution stay the identical all through a person’s profession, it is going to take over 28 years to construct a corpus of ₹1 crore.
(Do you might have private finance queries? Send them to [email protected] and get them answered by trade consultants)
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