EPF Interest Rate 2023: How to Calculate Interest on EPF?

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.

EPF Contribution

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.

*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:

EXAMPLE 1:

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 3^rd 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.

EXAMPLE 2:

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:

EPF Interest Rate 2021-22: FAQs