People who work for a salary in India use the Provident Fund (PF) as a very important way to save money for when they stop working. The Employees’ Provident Fund Organisation (EPFO) runs this saving plan. This plan helps workers save a large amount of money for their life after they retire. The company they work for and the worker both put a set part of the worker's salary into the PF account. This makes sure they have money when they are old. 

It is very important to know how they figure out how much money goes into the Employee Provident Fund (EPF). This knowledge helps people plan their money. This blog provides an in-depth explanation of how to calculate PF on salary, the EPF formula, the role of interest, and other essential details. 

What is EPF? 

The EPF plan helps workers get a large amount of money when they stop working at retirement. The government says workers who make less than 15,000 rupees in basic salary each month must join this savings plan.  

The EPF gives workers a way to save money over time. It makes sure they have money when they finish their jobs. The plan takes a part of their salary and puts it into a savings account. This money grows over the years. When workers retire, they can take out all the money they saved.  

EPFO operates three major schemes: 

  1. EPF Scheme (1952) – Employee Provident Fund 

  2. Pension Scheme (1995) – Employee Pension Scheme (EPS) 

  3. Insurance Scheme (1976) – Employees’ Deposit Linked Insurance (EDLI) 

Under this scheme: 

  • Employees contribute 12% of their basic salary + dearness allowance (DA). 

  • Employers also contribute 12%, but only 3.67% of this goes to the EPF. The remaining 8.33% is allocated to the Employee Pension Scheme (EPS). 

  • The current EPF interest rate for FY 2023-24 is 8.25% per annum. 

Latest EPF Update for 2023-24: 

The Indian government has increased the EPF interest rate to 8.25% for the financial year 2023-24. 

Key Features of EPF: 

  • People must make a mandatory contribution: Workers and their bosses each put a set amount of the worker's pay into the EPF account. 

  • Money grows with interest: The EPFO says how much interest the money earns each year, and they add that to the EPF account. 

  • People can take money out: Workers can take money from their EPF account when they retire, get sick, need to pay for school, or buy a house. 

  • People get a retirement payment: Some of the boss's money goes to the EPS, and this gives workers a monthly payment when they stop working. 

How is EPF Calculated? 

EPF is calculated using a fixed contribution from both the employee and the employer. 

Contribution Breakdown: 

  • Employee Contribution: 12% of basic salary + dearness allowance 

  • Employer Contribution: 12% of basic salary + dearness allowance, which is further divided into: 

  • 8.33% goes to the Employee Pension Scheme (EPS) 

  • 3.67% goes to the EPF account 

EPF Calculation Formula 

Total EPF Deposited = Employee’s Contribution (12%of Basic Salary + DA) + Employer’s Contribution (3.67% of Basic Salary + DA) 

Example Calculation 

Let’s assume: 

  • Basic Salary + DA = ₹14,000 per month 

  • Employee's Contribution (12%) = ₹1,680 

  • Employer's Contribution (3.67%) = ₹514 

  • Employer’s EPS Contribution (8.33%) = ₹1,166 

Total contribution to EPF each month: 

1,680 + 514 = 2,194 

Interest Calculation 

EPF accumulates interest monthly, but it is credited annually. 

  • Monthly Interest Rate = Annual Interest Rate / 12 

  • With the latest 8.25% annual interest rate, the monthly interest rate is 0.679%. 

Assuming an EPF balance of ₹4,388 in the second month: 

4,388 × 0.679 % = ₹29.79 (interest for the second month) 

This continues until the employee reaches retirement age (60 years). 

What is an EPF Calculator? 

An EPF calculator is an online tool that estimates the maturity amount of an EPF account based on: 

  • Monthly contributions (employee + employer) 

  • Interest rate 

  • Duration of service 

Using an EPF calculator saves time and ensures accuracy. 

How to Use an EPF Calculator? 

  1. Enter your basic salary + dearness allowance. 

  1. Enter the employee contribution percentage (default is 12%). 

  1. Enter the employer’s contribution (3.67% for EPF and 8.33% for EPS). 

  1. Input the interest rate (8.25% for 2023-24). 

  1. Select the contribution frequency (monthly, quarterly, yearly). 

  1. Click Calculate to see the estimated retirement corpus. 

Benefits of EPF Calculation 

  1. Retirement Planning: The EPF calculator helps employees plan their savings efficiently. 

  1. Tax Benefits: EPF contributions are tax-exempt under Section 80C of the Income Tax Act. 

  1. Accurate Financial Tracking: Employees can track their total PF balance, contributions, and interest. 

  1. Flexible Contributions: Employees can increase their contributions to Voluntary Provident Fund (VPF), though employers will not match this amount. 

Benefits of EPF Contribution 

For Employees: 

  • Retirement Savings: Builds a financial cushion for retirement. 

  • Tax Benefits: Under Section 80C of the Income Tax Act, contributions qualify for tax deductions. 

  • Interest Earnings: Earns compound interest over time. 

  • Financial Security: Can be partially withdrawn in emergencies. 

For Employers: 

  • Tax Deduction: Employer contributions are deductible under Section 36(1)(iv). 

  • Employee Welfare: Encourages long-term employee retention. 

  • Pension Support: Part of the employer’s contribution goes to the EPS. 

Important Rules About EPF 

  • Mandatory for employees earning less than ₹15,000/month. 

  • Cannot opt-out once enrolled in EPF. 

  • Voluntary Provident Fund (VPF) allows employees to contribute beyond 12%, but the employer isn’t required to match it. 

  • UAN (Universal Account Number) links all EPF accounts and helps track balances online. 

  • EPF withdrawals are taxed if done before 5 years of continuous service. 

How to Check Your EPF Balance? 

You can check your EPF balance through: 

  1. EPFO Portal: 

  • Visit epfindia.gov.in 

  • Click on "e-Passbook" 

  • Enter UAN & password to log in 

  • View your passbook with contribution details 

  1. SMS: 

  • Send EPFOHO UAN ENG to 7738299899 

  • Receive balance details via SMS 

  1. Missed Call Service: 

  • Give a missed call to 9966044425 from your mobile number which is registered. 

EPF Withdrawal Rules 

You can withdraw your EPF balance under certain conditions: 

  • Retirement: Full withdrawal after 58 years. 

  • Unemployment: Partial withdrawal after 1 month, full withdrawal after 2 months. 

  • Medical Emergency: Can withdraw up to 6 times the monthly salary. 

  • Home Purchase: Can withdraw up to 90% of EPF balance. 

  • Education or Marriage: Can withdraw up to 50% of employee’s contribution. 

Recommended Read: How to Transfer EPF Online?  

Disclaimer: All the features, interest rates, steps, and other information specified above are sourced when this page was written and are subject to change. For exact information, refer to the EPFO website or contact them. 

Frequently Asked Questions 

1. What is the contribution percentage for EPF? 

Employees and employers each pay 12% of the employee's basic pay plus extra cost of living pay. The employer divides their 12% into two parts: 8.33% goes to EPS, and 3.67% goes to EPF. 

2. How is EPF interest calculated? 

EPF interest is compounded monthly but credited annually. The current interest rate for 2023-24 is 8.25%, and the monthly interest rate is 0.679% (8.25% ÷ 12). 

3. Can I increase my EPF contribution? 

Yes, you can voluntarily contribute more than 12% through the Voluntary Provident Fund (VPF), but the employer is not required to match this extra contribution. 

4. How can I check my EPF balance? 

You can check your EPF balance via the EPFO portal, SMS (send ‘EPFOHO UAN ENG’ to 7738299899), or by giving a missed call to 9966044425. 

5. Is EPF withdrawal taxable? 

After completing five years of continuous service, EPF withdrawals are tax-free. If withdrawn earlier, TDS applies unless the total amount is less than ₹50,000. 

6. What happens to my EPF when I change jobs? 

Your EPF account remains active, and you can transfer your balance to the new employer’s account using your Universal Account Number (UAN). 

7. Can I withdraw my full EPF balance before retirement? 

Full withdrawal is only allowed after retirement (58 years) or 2 months of unemployment. Partial withdrawals are allowed for medical emergencies, home loans, education, marriage, or home construction. 

 

Disclaimer: This page includes information that has been compiled from many sources and is only offered for informational purposes. Since this type of data might change over time, we cannot guarantee that the information supplied or included within it is accurate. It is anticipated that the user would confirm with the relevant source prior to taking any choices or actions.