How Employees Provident Fund(EPF) Interest is calculated?

How EPF Interest is calculatedHow Employees Provident Fund(EPF) Interest is calculated?


As an employee, you would get Provident Fund statement every year. However, you might be wondering on how employees provident fund (EPF) interest is calculated in that statement. What are the components in Provident Fund? Which components in your EPF account affect the interest computation? As an employee, can you try and increase EPF Interest in a financial year? I would provide some insights on EPF interest calculation in this article.

What is Employees Provident Fund (EPF)?


Employee Provident Fund (EPF) is most beneficial and popular retirement saving scheme for salaried individuals. All salaried employees need to contribute 12% of their salary (Basic + DA) to the EPF account every month. While an equal amount of share from an employer would also be contributed, it would get split into 8.33% towards the EPF account and balance 3.67% would be transferred to Employee Pension Scheme (EPS). I would explain more about Employee Pension Scheme (3.67%) contribution of employer through an article in coming weeks.

Also Read: How to check EPF Balance through Mobile?

How Employees Provident Fund (EPF) Interest is calculated?


  • Now, let us come to the main point. Interest on EPF is calculated after considering few points.
  • Interest on EPF is calculated based on month end balance.
  • Month end balance would be equal to opening balance of the month, employee contribution of 12% of salary and 8.33% of employer contribution for the month.
  • Interest would be calculated every month, however, credited only at the end of the financial year on 31st March.

EPF Interest Calculation explained with an example.


  • The balance as of 31st March is Rs 10,000
  • Employee basic salary is Rs 1,000 (Basic + DA) per month. So, employee contribution of 12% of Rs 1,000 = Rs 120. Employer contribution of 8.33% of Rs 1,000 = Rs 83.30.
  • Assume an EPF interest rate is 8.5% per annum. The monthly interest rate would be 8.5% / 12
  • Apr EPF interest = Opening balance + Employee contribution + Employer contribution x Interest rate per month
  • Apr EPF interest = (10,000 + 120 + 83.30) x 8.5% / 12 = Rs 72.3
  • Now let us come to May. The closing balance of Apr is Rs 10,203.3 (Interest would not be added as it is credited only on 31st March).
  • May EPF interest = (10,203.3 + 120 + 83.30) x 8.5% / 12 = Rs 73.7.
  • See below table to understand how it would increase month on month. If you observe, interest for the year would be credited only at the year end on 31st March. So interest from Apr to Mar comes to Rs 962 in this case and is credited in Mar month. So Apr of next financial year, the balance in your account would be including interest.

Also Read: EPF Vs PPF Vs VPF – Which is best retirement scheme?

Interest calculation in EPF Account

As an employee, can you maximise EPF Interest in a financial year?

If you observe above computation, it is clear that month end balance is taken as basis for interest computation. All employers would deposit EPF amount during the month and file statutory filings. The only way your EPF interest would increase is by way of getting salary increments during the year . Otherwise, like in PPF where we can deposit amount before 4th of the month to enjoy interest for that month, in EPF we do not have any other choices to increase the interest.  Alternatively you can contribute to Volutary Provident Fund from employees point of view and get similar interest rate. You can check with your employer whether such facility is available with them. 

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Suresh
How Employee Provident Fund(EPF) Interest is calculated

Suresh KP

28 comments

  1. Sir,

    out of 12% employer’s contribution, to the best of my understanding, 8.33% goes to EPS and 3.67% to EPF. Forgive me if I am wrong but I request you to check this once.

    Regards

  2. EPFO is not adding last year’s interest in the current year for the purpose of calculation of interest.
    For example, suppose my EPF Balance (Employee share) as on 1.4.17 was 7,00,000 and interest earned in 2016-17 (credited on 31.03.17) was 60,200/- making the total balance as on 1.4.17 to Rs. 760200. The interest @ 8.55 for 2017-18 on this balance should be Rs. 64997 (leave aside the contributions during the year 2017-18). BUT EPF PF STATEMENT SHOWS ONLY RS. 60,675 AS INTEREST WHICH includes 1800 per month contribution for 11 months).

    HOW IS EPF INTEREST CALCULATED THEN?

  3. Details mentioned in list seems wrong employer contribution breakup should be –

    12% = 8.33 % in EPS +3.67% in EPF

    Please make the nessary changes accordingly.

    1. I agree with the observation of Yogesh Joshi and the way PF contribution is bifurcated between EPF and EPS. Except that EPS of 3.67% is capped at some amount (not able to recall immediately). It was earlier at some 6500/- per month salary, now probably, increased to around Rs. 12,000.00 per month salary.  Somebody needs to check the upper limit for which 3.67% contribution to EPS is calculated. 

  4. Let me know what is calculation for pf interest earnings earnings with vpf consideration and pf transferred from previous employer combined with.

  5. Hi earned 1320 Rand P\Week for 20 weeks in 2003, my contributions to the metal industry providant fund started. (12,05 2003 to 01,10,2003) its still unclaimed, how do I calculate the maturity amount? Thx Martin

  6. How to calculate the intrest for transfer account? I have transfered epf a/c. erlier account was for the period of 13 months feb 2015 to feb 2016. I got the updated ipassbook showing Int. Updated upto 31/03/2017 Rs 2179 and 328. but dot'nt know how they have calculated this? Please explain.

     

  7. If I apply for PF withdrawal for loan repayment in February, will I get the interest amount till January or interest for the financial year is not added to withdrawal amount? In case interest amount is not added, if I apply in April will I get the interest amount included for the previous financial year?

  8. My pf amount is  Rs. 32084/- as on today & paper is under process for settlment kindly confirm how many amount will be getting

      1. I think you can withdraw if you have 5 years of continuous service (need not be in one particular organization,I believe) without any tax (not sure if this is applicable only at the time of resignation or it can be done during employment) .

  9. Tough Mathematics there Suresh ha ha. Glad to have people like you to work the numbers. Always wondered how they calculate interest on employee provident fund..

  10. Hi suresh,

    i was working for 4 year in my last organisation, can i withdraw my PF and how ??will i get EPS amount ?currently am working with another org. and HR person told me to withdraw it and not to transfer the PF as it will be hectic for both of us. pls help. Thank you!!

  11. Hi Suresh,

    Thanks for your valuable information. After your post only I have checked mine. But I have observed one point in my passbook that till 092014 the employer contribution is same as 8.33 for EPF and 3.67 for Pension. But from 102014 it was changed as 4.67 for EPF and 7.33 for pension. I want to know whether this has been revised in the 2014 budget or is it unchanged?

  12. Hi Suresh,

    My employer credits salary for current month only on or after 4th of next month. Can this impact the EPF Interest?

    Thanks for clarifying.

  13. In case of PPF, whether the cut-off date of 4th or 7th or even 10th of every month for calculating the interest for that month. To my knowledge, it is 7th of every month and not 4th.

  14. Thanks Suresh for very descriptive article.
    I recommend all my friends and colleagues to read this article.
    Thank you very much Suresh.

  15. Dear Suresh,

    Thanks for your information. In our company they are deducting our EPF contribution during salary payment, but they have not remitted it to the Govt. before 15 th of every month both Ee & Er contributions. Every month (some times 2 to 3M delay) there is a delay in filing & payment to the Govt.

    In that case, whether we really enjoy the benefit of the interest as illustrated by you or we are losing the same because of Managements fault.

    Thanks ravi chandiran.s 9894828077

    1. Hi Ravi, Every company has to deposit PF amount before end of the month, however there is delay, such companies would be penalised. You would get interest only on closing balance. If there is delay, you would loose interest too.

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