Employee Provident Fund (EPF) is a scheme in which you can create wealth throughout your working years as an employee at a government or private organisation. This amount earns interest, and you can use it to finance a part of post-retirement life or other goals. In this scheme, both you and your employer make contributions towards your PF. You can claim the entire amount at the time of your retirement or two months after changing your job. You and your employer need to transfer 10% or 12% of your basic salary to contribute towards EPF. However, if you are a woman, you only need to contribute 8% of your basic salary for the first three years. During this period, your employer’s EPF contribution will remain 12%. For sick units or establishments with less than 20 employees, the rate is 10% as per Employees’ Provident Fund Organisation’s (EPFO) guidelines.
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EPF contribution
EPF contribution is divided into two parts.
Contribution by you
- Male employees must contribute 10% or 12% of their basic salary.
- Female employees must contribute 8% of their basic salary for the first three years. Thereafter it becomes, 10% or 12% of the basic salary.
Contribution by your employer
- Your employer must contribute an amount equal to 10% or 12% of your basic salary towards EPF.
- For female employees, the government contribution doesn’t change.
Contributed by |
Monthly Percentage Contributed |
Employer |
12% |
Employee |
12% or 10% |
Total |
24% |
This basic rate of EPF is further sub-divided.
- Employee’s Provident Fund (EPF): 3.67%
- Employee’s Pension Scheme (EPS): 8.33%
- Employee’s Deposit Link Insurance Scheme (EDLIS): 0.50%
- EPF Administration charges: 1.10%
- EDLIS Administration charges: 0.01%
Additional read: PF Account Number
Fixed deposit variants
How to calculate EPF contribution
Let’s understand with an example-
Assumptions:
- Employee's basic salary + dearness allowance = Rs 14,000
- Applicable interest rate = 8.25% per annum
Calculations:
Employee Contribution:
- 12% of Rs 14,000 = Rs 1,680
Employer Contribution:
- EPF: 3.67% of Rs 14,000 = Rs 514
- EPS: 8.33% of Rs 14,000 = Rs 1,166
Total Contribution:
- Employee + Employer = Rs 1,680 + Rs 514 + Rs 1,166 = Rs 2,360
Monthly Interest:
- 8.25% per annum / 12 months = 0.6875% per month
This means the employee's EPF account will receive a monthly interest of 0.6875% on the total contribution of Rs 2,360.
To check whether your employer is making contributions towards your EPF account or to see your account balance, you can use your UAN and log into your EPF account on the EPFO member portal.
Information Needed to determine the EPF Interest Rate
The information below is needed to determine EPF interest:
- The current age of an employee.
- Current EPF balance.
- Monthly basic and dearness allowance of up to a maximum of Rs. 15,000.
- Percentage of contribution to EPF.
- Retirement age.
Each month, the EPF contribution is credited to the EPF account, and interest is calculated monthly. Nonetheless, at the conclusion of the fiscal year, the entire amount of interest earned will be credited. 8.25% is the interest rate for FY 2024-2025. Because of this, the interest rate for each month's interest computation will be 0.679%, or 8.25%/12.
Additional read: Check Online PF Status
Benefits of EPF Contribution
Here are some benefits of EPF contributions:
1. Retirement Corpus
EPF serves as a retirement savings fund, ensuring financial security after employment.
2. Tax Benefits
Employee contributions to EPF are eligible for tax deductions under Section 80C of the Income Tax Act.
3. Financial Security
EPF acts as a safety net, offering financial stability during unforeseen circumstances.
4. Loan Facility
Members can avail loans against their EPF balance for specific purposes like home purchase or education.
5. Nomination Facility
EPF allows members to nominate beneficiaries, ensuring a smooth transfer of benefits in case of the member's demise.
6. Withdrawal Options
Members can make partial withdrawals for specific needs like education, medical emergencies, or home purchase.
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Frequently asked questions
The total EPF deduction from your salary is 12%.
This 12% is divided as follows:
- Employee Contribution: 12% of your basic salary + dearness allowance is deducted from your salary.
- Employer Contribution: 8.33% goes towards the Employees' Pension Scheme (EPS) and 3.67% goes towards the Employees' Provident Fund (EPF).
All these contributions are reflected in your EPF member passbook.
EPF interest is computed monthly but it is credited annually.
The EPF interest rate can vary and is subject to periodic revisions by the government.
EPF interest is credited to the subscribers' accounts by the Employees' Provident Fund Organization (EPFO).
EPF interest is credited until the time you withdraw the EPF balance or close the account.
Delay in the updation of EPF interest in your passbook does not result in any financial loss.
Delay in the updation of EPF interest in your passbook does not impact the amount you receive upon withdrawing your EPF balance.
The employer's contribution to PF is generally 12% of your basic salary. This may be split between contributions to the Employee Provident Fund (EPF) and the Employees' Pension Scheme (EPS).
Generally, PF is mandatory for all establishments with 20 or more employees.
For most companies, the employer's PF contribution is mandated to be 12%.
Provident Fund (PF) is calculated as a percentage of an employee's basic salary and dearness allowance. Typically, both the employee and employer contribute 12% each to the PF. For tax purposes, employee contributions up to Rs. 1.5 lakh are eligible for deduction under Section 80C of the Income Tax Act. The interest earned and maturity amount are tax-free if certain conditions are met.
You can check your employer's contribution to your EPF by logging into the EPFO portal using your Universal Account Number (UAN). After logging in, navigate to the 'Passbook' section, where you can view your contribution details, including the employer's share.
The employee's contribution to EPF is eligible for tax deduction under Section 80C of the Income Tax Act, up to Rs. 1,50,000 annually.
Employer PF is deducted from salary as part of a statutory contribution toward the Employee Provident Fund (EPF). This deduction helps build a retirement corpus for employees, ensuring financial security post-retirement. Employers also contribute to this fund on behalf of their employees.
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