How to calculate your employers EPF contribution

Understand how to calculate your and your employer’s contribution to the Employee Provident Fund (EPF).
Calculate employers EPF contribution
3 mins
16 July 2024

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.

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

How to calculate EPF contribution

This amount is calculated each month. To simply the math, assume that your basic salary is Rs. 25,000, including dearness allowance. Your contribution towards EPF is 12% of Rs. 25,000, which amounts to Rs. 3,000 each month. Your employer’s contribution towards EPF is 3.67% of Rs. 25,000, which comes to Rs. 917.50 per month.

  • Your employer’s contribution towards Employee Pension Scheme (EPS) is 8.33% of Rs. 25,000, which comes to Rs. 2,082.50 per month.
  • However, as per the norms, your employer can only contribute a maximum of 8.33% of the threshold amount of Rs. 15,000 towards your EPS. This means that your employer can only contribute a maximum of Rs. 1,249.50.
  • So, the difference between what the employer can transfer and the maximum stipulated amount, in this case, Rs. 833 (Rs. 2,082.50 - Rs. 1,249.50), is transferred to your employer’s EPF contribution.
  • So, your employer’s total EPF contribution becomes Rs. 2,915.50 as Rs. 833 is added to the initial amount of Rs. 2,082.50. As per EPFO guidelines, this amount is rounded off to the nearest decimal, making the total Rs. 2,915.

So, the total EPF contribution (by you and your employer) for a month amounts to Rs. 5,915 (Rs. 3,000 + Rs. 2,915).

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

How much percentage is EPF deduction from salary?

The EPF deduction from salary is typically 12% of the basic pay.

Is EPF interest credited monthly or yearly?

EPF interest is computed monthly but it is credited annually.

Is the EPF interest rate fixed or variable?

The EPF interest rate can vary and is subject to periodic revisions by the government.

What is the method of crediting EPF interest to the subscribers?

EPF interest is credited to the subscribers' accounts by the Employees' Provident Fund Organization (EPFO).

Till what time will I get EPF interest in my account?

EPF interest is credited until the time you withdraw the EPF balance or close the account.

Will I face a loss when there is a delay in the updation of EPF interest in my passbook?

Delay in the updation of EPF interest in your passbook does not result in any financial loss.

Will I face a loss if I withdraw the EPF balance when there is a delay in the updation of EPF interest in my passbook?

Delay in the updation of EPF interest in your passbook does not impact the amount you receive upon withdrawing your EPF balance.

Is employer contribution to PF 12% or 13%?

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).

Is PF mandatory for 10 employees?

Generally, PF is mandatory for all establishments with 20 or more employees.

Can employer PF be less than 12%?

For most companies, the employer's PF contribution is mandated to be 12%.

How is PF Calculated in Tax?

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.

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