Provident Fund Contribution Breakup

Provident Fund (PF) contributions ensure financial security for employees, comprising monthly deductions from salaries, matched by employer contributions.
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PF Contribution Breakup
OPEN FD
4 min
23-May-2025

The Provident Fund (PF) is a time-tested savings scheme that provides long-term financial security for salaried employees in India. Managed by the Employees’ Provident Fund Organisation (EPFO), PF ensures both employee and employer make monthly contributions that grow over time with interest. The accumulated corpus acts as a financial cushion after retirement or in emergencies.

But how does PF actually work? And how does it compare to other reliable options like Fixed Deposits (FDs)? Let’s break it down.

Why PF Contribution Matters

PF contributions are not just monthly deductions from your salary—they are an investment in your future. Here’s why they matter:

Benefits of PF Contribution

  • Retirement Corpus: Monthly contributions help you accumulate a substantial retirement fund.
  • Government Regulation: Managed by EPFO, PF accounts are secure and reliable.
  • Attractive Interest Rate: The EPF interest rate for FY 2024–25 is 8.25% p.a., outperforming regular savings accounts.
  • Tax Deductions: Contributions are eligible under Section 80C, reducing your taxable income.
  • Emergency Withdrawals: You can withdraw part of your PF for emergencies, education, or home buying.
  • Pension via EPS: A portion of your employer's contribution funds the Employees’ Pension Scheme (EPS).

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Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

By proceeding, you agree to our Terms and Conditions

Employee Contribution to PF

As per EPF guidelines, employees contribute 12% of their basic salary to PF. However, this is relaxed to 10% for specific sectors and companies:

  • Organisations with fewer than 20 employees
  • Companies with annual losses exceeding their net worth
  • Sick units as defined by BIFR
  • Specific sectors like beedi, jute, brick, guar gum, and coir industries

These relaxed rates ensure even small or financially challenged businesses can extend PF benefits to their workforce.

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Employer Contribution to PF

Employers also contribute 12% of Rs. 15,000 (or actual salary if higher and voluntarily agreed) every month to an employee’s PF account. This equals a minimum contribution of Rs. 1,800. However, this amount is distributed across various components:

Breakdown of Employer Contribution

  • EPF (3.67%): Directly deposited into the Provident Fund account
  • EPS (8.33%): Allocated to the Employee Pension Scheme (up to Rs. 15,000 salary cap)
  • EDLI (0.5%): Covers life insurance under the Employees’ Deposit Linked Insurance Scheme

Additionally, employers pay:

  • 1.1% as administrative charges for EPF
  • 0.01% as administrative charges for EDLI

The total employer outflow comes to 13.61% of the basic salary.

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Fixed deposit variants

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Fixed Deposit - Age below 60

INTEREST RATES UP TO
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Fixed Deposit - Minor

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Fixed Deposit - HUF

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Fixed Deposit - Sole Proprietor

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PF vs FD: A Balanced Approach to Saving

While PF secures your long-term future, Fixed Deposits help you achieve shorter financial goals. Here’s how they compare:

Criteria

Provident Fund (PF)

Fixed Deposit (FD)

Goal

Retirement savings

Short- to medium-term financial needs

Contributions

Monthly (employee + employer)

One-time or periodic, based on user preference

Interest Rate

8.25% p.a. for FY 2024–25

Up to 8.60% p.a.* with Bajaj Finance FD

Withdrawal Flexibility

Limited and conditional

Flexible—partial or full, depending on FD type

Tax Benefits

Section 80C + EPS pension benefits

80C for 5-year tax-saving FDs


Combining both ensures you are saving for tomorrow while having liquidity for today.

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Quick Recap

  • Provident Fund is a powerful tool for retirement savings, backed by employer contributions and government oversight.
  • The 12% contribution from both employer and employee builds a solid, interest-earning corpus.
  • EPS and EDLI offer added pension and insurance benefits.
  • Pairing PF with Fixed Deposits helps diversify your financial strategy for better flexibility and returns.

Check today’s FD interest rates and start growing your money confidently with Bajaj Finance.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator

FD Return Calculator

Sukanya Samriddhi Yojana Calculator

PPF Calculator

RD Calculator

Provident Fund Calculator

Gratuity Calculator

Frequently asked questions

Is employer contribution to PF 12% or 13 %?

Employer contribution to EPF is 12%, matching the employee’s contribution. Additionally, employers contribute 0.5% to EDLI and cover administrative costs (1.1% for EPF and 0.01% for EDLI), totaling 13.61%.

Is PF mandatory for a salary above 15000?

Yes. Opening a PF account is mandatory if you are earning a salary of Rs. 15,000 or more. However, salaried individuals at all income levels can opt-in for it voluntarily. Monthly contributions have to be made at 12% of the basic pay, which directly builds your EPF corpus.

What is PF 13% of basic?

While employees contribute 12% of their basic salary to the PF account, employers not only match this but also pay an additional 1.61% as a contribution to EDLI and administrative costs. Thus, employers contribute 13.61% of employees’ basic salary to their PF account.

What is the maximum PF contribution per month?

As an employee, you can contribute more than 12% of your income to the PF. This directly affects your take-home salary, so typically, most employees choose to pay only the minimum 12%. However, even if you increase your contribution, the employer is not obligated to follow suit and may choose to pay only 12%.

Can I invest in a Fixed Deposit even if I already contribute to PF?

Absolutely. In fact, many use FDs for surplus funds that are not locked into long tenures like PF. FDs offer liquidity, flexible tenures, and assured returns—making them the perfect addition to your financial plan. Check out Bajaj Finance FD now.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

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