EPF/PF Interest Rate 202: EPF Interest Rate Will Remain 8.15%. (2024)

For a very long term, theEmployees Provident Fundhas been one of the most widely-used investment schemes by the salaried class in India. The Employee Provident Fund scheme was launched under the supervision of the Government of India. The plan was introduced with the Employees’ Provident Funds Act in 1952. It is managed by the Employees’ Provident Fund Organisation (EPFO). The government has mandated contributions to this scheme.

Since the scheme is managed by the government, it is considered to be a safe investment. The primary aim of the scheme is to create a retirement corpus for an individual. Furthermore, it has plenty of benefits which makes it an attractive saving option for retirement. What works in the favour of this scheme is the monetary contribution by not just the employee but the employer as well, ensuring you can accumulate a good corpus.

In this article, we look at EPF interest calculation, the past trends, its tax benefits, and more.

1. EPF Interest Rate 2024

The Employees Provident Fund Organization (EPFO) Central Board of Trustees, after consultation with the Ministry of Finance reviews the EPF interest rates every year. The review of the EPF interest rate for a financial year is set at the end of the financial year. For the financial year 2024, the Employee Provident Fund interest rate is set at 8.15%.

2. EPF Contribution by Employee and Employer

EPF contribution is made up of two parts – The employer’s contribution and the Employee’s contribution.

The employee’s contribution to PF is 12% of basic salary plus dearness allowance towards his Employee Provident Fund account. In case the establishment has less than 20 employees, the employees have to make a lower contribution of 10%. For industries such as jute, coir, beedi, brick, guar gum, and more, the lower contribution of 10% applies.

On the other hand, for the employer’s contribution to PF, 8.33% is for Employees’ Pension Scheme. Whereas 3.67% is added to the Employee Provident Fund account of the employee. Apart from this, the employer is also required to contribute 0.50% towards the Employees’ Deposit Linked Insurance (EDLI) account of the employee. The minimum administrative charge is ₹500. However, if no contribution is made for a particular month, the employer is required to pay a fee of ₹75 for that month.

It is worth noting that the government reduced the existing Employee Provident Fund contributions for June, July, and August 2020 from 12% to 10%. This relief measure came as a part of Covid-19 Relief Atmanirbhar 20,00,000 crore package.

3. How to Calculate the Contribution of EPF

Let us understand how to calculate contribution on Employee Provident Fund with the help of an example.

Let us assume you draw a basic salary and dearness allowance of ₹40,000. The below table helps you understand the contribution in the Employee Provident Fund.

Note:As per the Employee Provident Fund rules, the employer contributions are payable on maximum wage ceiling of ₹15000. However, the contribution can also be done on higher wages (i.e. above ₹15000) by submitting a joint request from Employee and employer as required in Para 26(6) of EPF Scheme. But in such a case, the employer will have to pay administrative charges on the higher wages.

4. How to Calculate PF Interest

EPF interest is calculated at the end of the month and credited to your account at the end of the financial year, i.e. 31st March. Currently, EPF offers an interest rate of 8.15% p.a. Hence; you will earn monthly interest of 0.6791% (8.5%/12) on your balance.

Let’s understand EPF interest calculation with the help of an example:

Assume Mr Ram earns Rs. 30,000 monthly (Basic + Dearness Allowance). In this case, his EPF interest will be calculated as follows:

*As EPF interest is calculated at the month’s end, there will be no interest for the first EPF contribution.

**The maximum limit employer EPF contribution is Rs.1,250. In the given example, employer EPS contribution is calculated as Rs.2,499 (Rs.30,000 x 8.33%), but as per the EPF rules, it can not exceed Rs.1,250.

The same method is used for subsequent contributions of the year. Any previous year’s accumulated interest and balance in the account gets carried forward to the following years. It is used for interest calculation in the next financial year.

Calculating EPF interest on your own is a time-consuming process, and there are high chances of calculation errors. Hence, in this situation, you can use the EPF Calculator to estimate your interest in your EPF account. It allows you to easily calculate the maturity amount and the total interest earned on your EPF balance.

5. EPF interest rate last 10 years history

Listed below is a table showing the past trends of the Employee Provident Fund interest rate, including the current EPF interest rate.

6. EPF Interest Rate for Inactive Accounts

When there is no contribution in an Employee Provident Fund account for 36 months, it becomes dormant or inactive. Typically, this can happen in cases where the employee forgets to transfer his Employee Provident Fund account from the old employer to the new one.

From 2016, your inactive Employee Provident Fund account will also earn interest on the balance amount as per the existing rates. Presently, the EPF Interest rate is 8.15% per annum.

It is important to note that you will not earn any interest once your account has become inoperative, i.e., after the end of the scheme tenure. This means when you become 58 years or older and have not withdrawn your Employee Provident Fund Balance, you will not earn interest on the balance.

7. Tax Benefits on EPF Contributions

You can claim a deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act, 1961. You can avail of a tax deduction on the amount you have contributed to the Employee Provident Fund account. Please note that the amount is tax-free if you withdraw it only after completion of 5 years. However, if you withdraw the Employee Provident Fund amount before 5 years, income tax gets deducted from the employee’s hands.

8. Frequently Asked Questions (FAQs)