Employed Provident Fund (EPF) is a retirement benefit scheme for private sector employees. Contribution is made by both the employee and the company in the EPF account. This contribution is 12-12 percent of the basic salary (+DA).

The interest rates of EPF are fixed by the government every year. The interest rate of EPF for the financial year 2022-23 is 8.15 percent per annum. The Employees Provident Fund Organization (EPFO) manages the EPF account. EPF is an account in which the corpus gradually becomes large till retirement.

EPFO
30 years of age ₹ 10,000 basic salary

Suppose the basic salary (+DA) is Rs 10,000 and the age is 30 years. The age of retirement is 58 years. In this way you have 28 years for contribution. According to the EPF Calculator, on this basis, when we calculate the PF till retirement, a fund of about Rs. 67 lakhs will be created. This includes 10% annual salary increment every year. EPF Calculation:

Understand it this way

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Basic salary + DA = ₹10,000

Current age = 30 years

Retirement age = 58 years

Employee monthly contribution = 12 percent

Employer monthly contribution = 3.67 percent

Interest rate on EPF = 8.15 percent per annum

Annual salary growth = 10 percent

Maturity fund at the age of 58 = 67.75 lakhs (Employee contribution was Rs 21.40 lakh and employer contribution was Rs 6.54 lakh. Thus the total contribution was Rs 27.95 lakhs.)

Understand the details of EPF contribution

Employee’s basic salary and dearness allowance in EPF account 12% of DA is deposited. But, the employer’s 12% amount is deposited in two parts. Out of the employer’s 12% contribution. 8.33% amount is deposited in the employee pension account and the remaining 3.67% amount goes to the EPF account. It is mandatory for employees whose basic salary is less than Rs 15,000 to join this scheme.

How is interest calculated

Interest is calculated (PF Interest calculation) on the basis of the money deposited every month in the PF account i.e. monthly running balance. But, it is deposited at the end of the year.

According to the rules of EPFO, if any amount has been withdrawn from the balance amount on the last date of the current financial year in a year.

then interest for 12 months is calculated by deducting it. EPFO always takes the opening and closing balance of the account. To calculate this, monthly running balance is added and multiplied by interest rate/1200.

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