EPF Interest Rate Calculation 2025
The Employees’ Provident Fund Organisation announced an increase in the interest rate on provident fund deposits to 8.25% for the fiscal year 2024-25. This marks an improvement from the previous year's rate of 8.15% and the 8.10% rate observed in 2021-22. The decision will bring relief and satisfaction to more than 65 million EPFO subscribers.
The Employees' Provident Fund (EPF) is a savings scheme for employees who are working for organisations that come under the Employees' Provident Fund Organisation (EPFO).
Under the EPF scheme, an employee must make a contribution to the scheme, and the employer must make an equal contribution.
On retirement, the employee receives a lump sum payment that includes both their own and the employer's contributions, as well as interest on both.
Here the key highlights of EPF
- Employer and employee make contributions
- Interest rate is 8.25% p.a. for FY 2024-25
- Wage ceiling is Rs.15,000
- Mandatory for organisations with over 20 employees
Methods for the calculation of interest rates
The EPFO decides the rate of interest for the EPF scheme on a yearly basis. The rate of interest is dependent on the market conditions and is vetted by the finance ministry. The interest rate can be calculated either by using the step method or the formula method. Given below is an example of the calculation of interest using both methods with the interest rate 8.25%:
Assumptions
EPF Basic salary and dearness allowance: Rs.40,000
Rate of interest: 8.25%
Employee's contribution towards EPF (12% of Rs.40,000): Rs.4,800.
Employer's contribution towards EPF (3.67% of Rs.40,000): Rs.1,468
Employer's contribution towards EPS (8.33% of Rs.40,000): Rs.3,332
Employer's contribution towards EPS under the Rs.15,000 wage ceiling (8.33% of Rs.15,000): Rs.1,249 which is rounded to Rs. 1,250.
The contribution made by the employer towards EPS that is more than the wage ceiling (Rs.3,332-Rs.1,249): Rs.2,082
The excess contribution made by the employer is added to the EPF contribution (Rs.2,082Rs.1,468): Rs. 3,550
Therefore, the total contribution made by the employer and employee towards EPF (Rs.4,800+Rs.3,550) is Rs.8,350.
- Formula method: Given below is the method to calculate the interest using the formula method:
(8.25%/12) x Rs.8,350= Rs.57.40, which is rounded off to Rs.57
- Step method: Mentioned below is the calculation of interest using the step method:
8.25%/12 = 0.6875% rounded to 0.69%
0.69% x Rs.8,350 = Rs.57.62, which is rounded off to Rs.58
Therefore, the calculations for the rate of interest are the same using both methods. Interest can also be calculated with the help of the PF interest calculator that is offered by various third-party websites.
The balance that is available at the end of the year will be the opening balance that is present for the next year.
Example of calculation of interest for a financial year
The table below is an example of the calculation of interest for an entire financial year:
Months | Basic salary plus dearness allowance | Contribution made by the employer (Rs.) | Contribution made by the employee (Rs.) | Total balance that is available at the end of the month (Rs.) | Interest that is generated (Rs.) |
1 | 40,000 | 3,550 | 4,800 | 8,350 | 0 |
2 | 40,000 | 3,550 | 4,800 | 16,700 | 57 |
3 | 40,000 | 3,550 | 4,800 | 25,050 | 113 |
4 | 40,000 | 3,550 | 4,800 | 33,400 | 170 |
5 | 40,000 | 3,550 | 4,800 | 41,750 | 227 |
6 | 40,000 | 3,550 | 4,800 | 50,100 | 284 |
7 | 40,000 | 3,550 | 4,800 | 58,450 | 340 |
8 | 40,000 | 3,550 | 4,800 | 66,800 | 397 |
9 | 40,000 | 3,550 | 4,800 | 75,150 | 454 |
10 | 40,000 | 3,550 | 4,800 | 83,500 | 510 |
11 | 40,000 | 3,550 | 4,800 | 91,850 | 567 |
12 | 40,000 | 3,550 | 4,800 | 1,00,200 | 624 |
Calculation of the total EPF balance that will be present in the account at the end of the year is the addition of the total balance that is present at the end of the last month and the total interest that has been generated. Therefore, the total balance available in the account is:
Rs.1,00,200 + Rs.3,743 = Rs.1,03,943
Contributions made by employee and employer
Before learning about the various techniques for calculating interest, it is critical that employees understand their contribution to the program. Employee contributions might range between 8% (in the case of women for the first three years of employment), 10%, and 12%.
The employer's contribution to the EPF plan is 10% or 12% of the employee's salary. If the number of employees employed by the company is less than 20, the employer's contribution is ten percent. The employer's contribution, on the other hand, is split between the EPF,Employees' Pension Scheme (EPS), and Employee Deposit Linked Insurance (EDLI).
The break-up of the employee's and employer's contribution to the scheme is mentioned below:
Contributions | Employer's contribution | Employee's contribution |
EPF | 3.67% | 12% |
EPS | 8.33% | Nil |
EDLI | 0.5% | Nil |
Salary more than the wage ceiling
In case the salary of the employee is more than Rs.15,000, one of the below-mentioned methods can be opted by employers:
- The employer may allow the employee to pay 12% of his/her basic salary and dearness allowance and restrict their contribution to the Rs.15,000 wage ceiling.
- The employer may match the employee's contribution even if the salary is above Rs.15,000.
- The employer can restrict both the contributions to the Rs.15,000 wage ceiling.
Information required to use a PF Interest Calculator
An employee should enter the following information in a PF interest calculator to know his/her PF interest:
- Current age of an employee
- Current EPF balance
- Age of retirement
- Monthly basic pay
- Monthly dearness allowance
- Monthly EPF contribution in percentage.
- Expected salary hike
Once you enter the above-mentioned information in the PF calculator, it will reveal the total interest you would receive at the time of retirement. EPF calculation is, therefore, made easier by EPF calculator.
Tax Benefits on EPF contributions
An employee can get tax benefits for contributing to PF accounts under section 80C of the Indian Income Tax Act, 1961. This benefit can be availed for contributing up to Rs. 1 lakh to a PF account.
If you contribute for an employee provident fund account for 5 years, you will escape tax deduction on the amount you have contributed. But, if the duration of your EPF contribution is less than 5 years and you withdraw your PF contribution before it completes 5 years, income tax will be deducted at source (TDS).
FAQs on EPF Interest Rate
- What are the tax exemptions on EPF?
Withdrawals, contributions, and interest earned are all tax-free. Contributions of up to Rs.1.5 lakh are deductible under Section 80C of the Income Tax Act.
- Can I get a loan against my EPF balance?
The EPF scheme contribution is intended to cover post-retirement needs. However, you do not have to until retirement to receive monetary support. These advances are only available in some circumstances such as the purchase of a home, children’s education, home loan repayment, etc. The advances obtained are not subject to repayment, unlike loans.
- What is a UAN?
The Universal Account Number (UAN) is a unique assigned by the EPFO to the subscribers. Multiple member IDs issued by various organisations where an employee worked are consolidated under the UAN.
- Can I withdraw my EPF funds when I am unemployed?
Yes, after one month of unemployment, you can withdraw 75% of your EPF deposit. You can withdraw the remaining 25% of the money if you are unemployed for two consecutive months.
- How does an employee get their UAN number?
If you work for a company with more than 20 workers, you are eligible for EPF benefits. EPFO assigns each member a 12-digit permanent number known as a Universal Account Number (UAN). A member's UAN is linked to all of his PF accounts.
- What are the rules regarding withdrawals from EPF funds, including EPF interest?
Upon retirement, an employee can normally withdraw the principal amount as well as the accrued interest. Any individual over the age of 54 years can withdraw 90% of the accumulated amount. Individuals who are unemployed for 60 days or more can withdraw the total accrued amount.
- Am I required to link my Aadhaar and PAN to my EPF portal?
Yes, If you want to use the EPF portal for online services, you must link your UAN to your Aadhaar and PAN.
- What is the contribution limit to Voluntary Provident Fund Scheme?
VPF contributions can be made up to 100% of the basic salary and also Dearness Allowance.
News about EPF Interest Rate
EPFO hikes EPF interest rate to 8.25% for FY 2023-24
The interest rate on provident fund deposits has been raised to 8.25% for the fiscal year 2023-24 by the Employees' Provident Fund Organisation. This signifies an increase from the preceding year's 8.15% and the 8.10% rate in 2021-22. Over 65 million EPFO subscribers are expected to benefit from this decision.
Devarthi Gattuwar is a Finance Content Writer who has experience writing about Credit Cards, Debit Cards, Tax, and other BFSI products. Other than that, she also writes about non-financial utility products like Aadhar Card, Voter ID, Government Certificates, etc. She has a special interest in Social Media Marketing and its nuances. She likes to read and learn new things. She's a mental health advocate and a dog lover. |
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