As per the EPFO records, the current EPF interest rate is 8.10%. This rate is applicable from 1st April 2022 to 31st March 2023.
In this post we have explained how to calculate EPF interest with or without using the EPF interest rate calculator. It is noteworthy that although the interest on EPF is calculated on a monthly basis, it is credited annually.
Before we explain EPF interest calculations, it is important to familiarize with EPF contribution because this is what we are going to calculate interest on.
Employees contribute 12% (0r 10% in certain cases) of their basic salary + DA towards EPF and employers match this amount. However, there’s a catch here. The entire employer’s contribution does not go towards the EPF account. While 3.67% of this amount goes to the EPF, the remaining 8.33% is directed towards the EPS* account.
|Employee’s Contribution: 12% or Basic Salary + DA |
Employee’s Contribution: 3.67% to EPF and 8.33% to EPS
*EPS: Employee’s Pension Scheme
How to Calculate EPF Interest?
EPF interest is calculated on the EPF contributions made monthly by the employee and employer. The picture seems quite clear but there is a small kink to it – employer’s contribution. As explained above, the larger chunk of employer’s contribution goes to the EPS account and only 3.67% is actually directed towards EPF. EPF calculation of interest does not take into account the EPS contribution.
DID YOU KNOW?
EPS contribution is to be calculated on Rs 15,000 or less. If employee’s basic salary + DA is more than 15,000, EPS contribution will still be calculated on Rs 15,000 only and the remaining amount will be directed to EPF.
For ease, you can use any EPF calculator available online. Using such an EPF interest rate calculator is pretty. You input the interest rate, total EPF contribution and interest gets calculated.
Let’s understand it with the help of a simple example:
Suppose your basic salary + DA = Rs. 15,000 and you contribute 12% of this amount towards EPF. There will be no interest for the first month as there will be no contribution in the first month of opening the EPF account (for the first time).
Step 1: Employee’s contribution = 12% of 15,000 = 1,800 (A)
Step 2: Employee’s contribution = 8.33% of 15,000 = 1,249
= 3.67% of 15,000 = 550** (B)
Total EPF contribution for 2nd month = Rs 2,350 (A + B = 1,800 + 550)
Current interest rate= 8.10%
Interest will be calculated on monthly, therefore: 8.10/12 = 0.675%
Step 3: Total interest = 0.675% x 2,350 = Rs. 15.8625
Total EPF contribution for 3rd month = Rs 2,350 + 2,350 = Rs 4,700 (C)
Total interest calculated = 0.675% x 4,700 (C)
= Rs 31.725
Interest is not compounded monthly but only annually when it is credited to the EPF account.
**(0.50 is directed towards EDLI)
DID YOU KNOW?
The current EPF interest rate for FY 2021-22 is the lowest in the last 40 decades! Yes, that means the last time EPF interest rate was below 8.10% was in FY 1977 – 78 (8.00%).
Let’s take another example of when the basic salary is more than Rs 15,000, say Rs 50,000.
Step 1: Employee’s Contribution = 12% of 50,000 = Rs 6,000 (A)
Step 2: Employee’s Contribution = a) 3.67% of 50,000 to EPF = Rs 1,835 (B)
b) 8.33% of 50,000 is further divided into 2 parts:
= 8.33% of 15,000 to EPS = Rs 1,250 (not included for EPF interest)
= 8.33% of 35,000 to EPF = Rs 2,915 (C)
Step 3: Total EPF contribution = A + B + C = Rs (6,0000 + 1,835 + 2,915) = Rs. 10,750
For better understanding, the total EPF contribution of Rs 12,000 is divided as:
|Read more about EPF:|
|EPF Balance Check||EPF Correction Form||EPF Passbook|
|EPF Calculator||EPF Status Check Online||EPF Pension|
|EPF Contribution||EPF Online Claim||EPF Premature Withdrawal|
|Read more about UAN:|
|Read more about EPFO:|
|EPFO E-Sewa||EPFO Online Payment||EPFO KYC Online Update|
|EPFO Establishment||EPFO Member Portal||EPFO Registration Process|
|Read more about EPF Forms:|
|EPF Form 10C||EPF Form 19||EPF Withdrawal Form 31|
EPF Interest Rate 2021-22: FAQs
For the FY 2021-22, EPF interest rate is 8.10% which is 40 points below the previous EPF interest of 8.50%. (EPFO has not released EPF rate of interest for 2022-23 as of yet) to be 8.1%.
Yes. If your organization allows, you can opt for the minimum EPF contribution of Rs 1,800 i.e. 12% of Rs 15,000 – even if your basic salary is more than that.
EPF interest rate is proposed on yearly basis by the EPFO or the Employee’s Provident Fund Organisation.
Yes. You can withdraw the EPF amount as well as the interest credited on it if you have been unemployed for more than 2 months. Also, if the EPF member dies before 58 years of age, then also this amount can be fully withdrawn (i.e. with interest).
EPF investments are eligible for tax benefits of up to Rs. 1.5 lakhs in a financial year, as per the section 80C of the IT Act, 1961.