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EPF Interest Rate Calculation

Employees Provident Fund or commonly known as EPF is a retirement savings scheme which is managed and administered by the Central Board of Trustees. It is a collection of funds contributed by the employer and his employee on a month on month basis. EPF serves to a large number of people spread across the country. It is also considered to be one of the largest organisations and is acknowledged globally. The current Interest rate on EPF savings are 7.8% .

How to Calculate EPF Interest Rate

At present, the Government is clinging on to the rate of interest for General Provident Fund (GPF) and other related schemes at 7.8% for the October – December quarter. And the rate is in accordance with that for Public Provident Fund (PPF).

The Government of India has announced that during the Financial Year 2017-18, accumulations at the credit of subscribers to the General Provident Fund (GPF) and other similar funds shall carry interest at the rate of 7.8 percent with effect from October 1 to December 31, 2017. This would apply to Provident Funds of central government employees, railways and defence forces
said a government official.

Contribution Structure of EPF

EPF has been categorized into two parts which are as follows:

  1. Contribution made by Employee

In this category, 12% of the basic salary of the employee will be deducted from employee’s salary.

  1. Contribution made by Employer

In this category, contribution made by the employer is also 12% which is the basic salary of the employee. In spite of that, this 12% is further subdivided into the following four parts which are as follows:

Also, please note that in case the basic salary of the employee plus the Dearness Allowance (DA) is more than Rs. 15,000 then employer’s contribution towards employee’s EPF will have three options to choose from which are:

  • Employees or company’s contribution of nearly Rs. 15,000 yearly can be restricted by the employer
  • Employer may contribute towards EPF an amount equal to employee’s own contribution
  • Employer may restrict your share in EPF as 12% of the salary while its own share to Rs. 15,000

Things to Ponder over at the time of Calculating EPF Interest

EPF contributions are shown by the employer with respect to the salary due. For example, salary for the month of August will be paid in September and the EPF contribution for August will be shown in September and not in August.

In case of death of the employee, the interest is payable till the month preceding the month in which death occurred.

Now let us look at some of the new Amendments made to EPF and EPS Schemes.

According to the new amendment, an EPF holder can nominate a family member as a beneficiary / nominee. The beneficiary or nominee would receive Rs. 3 lakh as insurance coverage, in case of sudden demise of the member. Earlier, the value was only Rs. 1.56 lakh.

Earlier, the minimum contribution was set at 12% of Rs. 6,500. However, it has been revised to 12% of Rs. 15,000 per month. Hence, the employees are now expected to contribute Rs. 550 per month and Rs. 1,250 per month towards EPF and EPS, respectively.

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