EPF Interest Rate

The Employees' Provident Fund (EPF) is a government-backed retirement savings scheme governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Under this scheme, both employers and employees contribute a fixed percentage of the employee's salary every month. The Employees' Provident Fund Organisation (EPFO) administers the scheme and ensures efficient management of member accounts. 

It generally covers establishments employing 20 or more people, although certain smaller establishments may also qualify under applicable provisions. The PF interest rate plays an important role in growing retirement savings over time. For EPF contributions made between 1 April 2024 and 31 March 2026, the declared interest rate is 8.25% per annum, helping members build a stable retirement corpus. 

Key highlights

• EPF is a mandatory retirement scheme where employees and employers contribute monthly towards long-term savings.
• The EPF interest rate for FY 2025–26 is fixed at 8.25%, reviewed annually by the EPFO.
• Interest is calculated monthly but credited yearly, and dormant accounts after 36 months earn taxable interest.
• Employee and employer contributions vary based on salary, wage ceiling, and establishment type.

• EPF withdrawals are allowed at retirement, after unemployment, or for specific financial needs like medical expenses or home loans.

  
  

EPF Interest Rate FY 2025-2026

EPF interest rate for the financial year 2026 is set at 8.25% per annum. This rate applies to all EPF contributions made between 1 April 2024 and 31 March 2026. The EPF interest rate is reviewed annually, and after the EPFO announces the rate for a fiscal year, it is calculated based on the monthly closing balance and then applied for the entire year. The scheme covers all entities employing 20 or more individuals, and certain entities may also be included under specific conditions and exemptions, even if they do not meet the 20-employee requirement.

The newly published interest rates remain applicable for the upcoming fiscal year, starting from April 1st of one year and ending on March 31st of the following year.

Here are key points to remember about the EPF Interest Rate:

• The interest rate of 8.25% is now in effect and applies to EPF deposits.
• While interest is computed monthly, it is credited to the Employees’ Provident Fund account only once a year on March 31st of the respective fiscal year.
• The interest accrued is added to the balance for the following month, i.e., April's balance, and is factored into the interest calculation.
• If no contributions are made to an EPF account for 36 consecutive months, the account becomes dormant or inoperative.
• Employees who have not reached retirement age may still earn interest on their inactive accounts.
• Inactive accounts of retired employees do not accrue interest.
• Interest earned on dormant accounts is taxed at the member's income tax slab rate.
• Employees do not receive interest on contributions made to the Employees’ Pension Scheme. However, after the age of 58, a pension is provided from this amount.

EPF vs. Traditional Savings

Choosing between EPF and traditional savings depends on your financial goals, liquidity needs, and tax planning. EPF is designed for long-term retirement savings, while bank deposits and savings accounts provide easier access to funds. The comparison below highlights the key differences for the current financial year.

Overall, EPF remains a suitable long-term retirement savings option for eligible salaried employees, while traditional savings products primarily support liquidity and short-term financial goals.