Employee Provident Fund (EPF) is a retirement benefits scheme framed under the Employees Provident Fund & Miscellaneous Provisions Act, 1952. The scheme applies to those who are employed. As per the EPF scheme, the employer deducts a certain amount of contribution from the employee’s salary and deposits in his or her EPF account. An employer also contributes to the employee’s EPF account.
On retirement, the employee receives a lump sum corpus of EPF, including the employee’s contribution, employer’s contribution and the interest amount credited every year. The government reviews the interest rate on EPF accounts regularly. For the FY 2023-24, the interest rate notified is 8.25%.
Union Budget 2023 Outcome
The TDS rate has been reduced from 30% to 20% on taxable withdrawal of EPF for individuals who do not posses PAN.
EPF Interest Rate 2024
The EPF Interest Rate for 2024 is fixed at 8.25%. This rate is valid for all EPF contribution made from 1st April 2023 to 31st March 2024.
The EPF interest is calculated monthly on the EPF contributions but deposited into the EPF account only on 31st March of the applicable financial year. Thus, the total interest for the year will be credited at the end of the financial year. Interest for the FY 2023-24 is 8.25%. Hence, for every month interest calculation, the interest rate will be considered as 0.688%, i.e. 8.25%/12.
An EPF account becomes inoperative or dormant if EPF contributionsare not madeinto an EPF account for a continuous 36 months. EPF interest will be credited to theemployees'accounts until they become inoperative or dormant. However, interest will notbe creditedto the inactive EPF accounts.
EPF Contribution Rate
- Employee contribution to EPF: 12% of salary.
- Employer contribution to EPF: 3.67% of salary.
- Employer contribution to EPS: 8.33% of salary subject to a ceiling of Rs. 15,000 salary, i.e. Rs. 1,250.
Details Required to Calculate EPF Interest Rate
The following details are required to calculate EPF interest:
- The current age of an employee.
- Current EPF balance.
- Monthly basic and dearness allowance of up to a maximum of Rs.15,000.
- Percentage of contribution to EPF.
- Retirement age.
Calculation of EPF Interest
The employee’s contribution is 12% of basic salary + dearness allowance, while the employer’s 12% contribution is divided into two parts - 8.33% towards EPS account upto a maximum of Rs 1,250 per month and balance amount is transferred to the EPF account.
For example, if an employee’s basic salary + dearness allowance is Rs. 50,000:
- Employee contribution to EPF (12% of Rs. 50,000): Rs. 6,000.
- Employer contribution to EPS (8.33% of Rs. 15,000): Rs. 1,250.
- Employer contribution to EPF (6,000 - 1,250): Rs. 4,750.
The total EPF contribution for a month will be ( Rs. 6,000 + Rs. 4750): Rs. 10,750.
Total EPF contribution in the above case for the first month of joining the service = Rs. 10,750.
Interest Rate: 8.25% / 12 months = 0.688%
Interest on the EPF contribution for the 1st month = Nil
EPF account balance at the end of 1st month = Rs. 10,750
EPF contribution in the 2nd month = Rs. 10,750
Total amount accumulated in the 2nd month of service=Rs. 21,500
Interest accrued on the EPF contribution in the 2nd month = Rs. 21,500 * 0.688%= Rs.147.92
Total EPF contribution balance at the end of 2nd month = Rs. 21,500
EPF contribution in 3rd month= Rs. 10,750
Total amount accumulated in 3rd month= Rs. 32,250
Interest on the EPF contribution as on 2nd month= Rs. 32,250 * 0.688% = Rs.221.88
Total EPF contribution balance at the end of 3rd month= Rs. 32,250
A similar calculation is done for all other months of the year.
The total EPF balance at the end of the year will be the sum of the employer contribution, employee contribution, and monthly interest accrued during the year.
Also, the closing balance of the EPF account in the first year will be the opening balance for the second year. And EPF interest for the second year will be calculated, including the opening balance carried forward from the previous year.
To calculate your EPF fund after retirement, go to the EPF calculator.
Note:
- Salary means basic salary plus dearness allowance.
- If the entity is a designated entity or has less than 20 employees, a lower contribution of 10% of wages is required.
EPF Interest Rates for the Last 15 Years
| Financial Year | Rate of Interest p.a. |
| 2023-2024 | 8.25% |
| 2022-2023 | 8.15% |
| 2021-2022 | 8.10% |
| 2020-2021 | 8.50% |
| 2019-2020 to 2020-2021 | 8.50% |
| 2018-2019 | 8.65% |
| 2017-2018 | 8.55% |
| 2016-2017 | 8.65% |
| 2015-2016 | 8.80% |
| 2013-2014 to 2014-2015 | 8.75% |
| 2012-2013 | 8.50% |
| 2011-2012 | 8.25% |
| 2010-2011 | 9.50% |
| 2005-2006 to 2009-2010 | 8.50% |
Taxation on EPF Interest
An employee’s contribution to the EPF account above Rs.2.5 lakh in a financial year is taxablein the hands of the employee.The interest accumulated for above Rs. 2.5 lakh contributionsisalso subject to TDS. However, the interest accumulated on EPFcontibutionswithin Rs. 2.5 lakharetax-free.The interest collected on dormant accountsis taxablein the hands ofthe member.
Employees can claim tax deductions on EPF contributions up to Rs.1.5 lakh under Section 80C of the Indian Income Tax Act, 1961.In addition, there will be no tax deduction on EPF partial withdrawal when the PF funds are withdrawn after 5 years of continuous contribution to the account.
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