In this article we will take a comprehensive look at the online registration process of the Provident Fund scheme and the benefits of registering for the scheme
EPF Interest Rate 2024
The Employees’ Provident Fund (EPF) is a savings scheme designed for employees working in organisations governed by the Employees’ Provident Fund Organisation (EPFO). Under this scheme, both the employee and the employer must make contributions to the EPF fund. Upon retirement, the employee receives a lump sum payment that includes their own and the employer’s contributions, along with pf interest on both amounts.
Here are the key highlights of the EPF:
Contributions: Both the employer and the employee are required to make contributions to the EPF fund.
PF Interest Rate: The EPF offers an attractive interest rate of 8.25% per annum for the financial year 2023-24.
Wage Ceiling: The EPF applies to employees whose monthly wages are below the wage ceiling of ₹ 15,000.
Mandatory for Certain Organisations: Organisations with more than 20 employees are mandated to provide the EPF scheme to their employees.
The EPF scheme aims to provide financial security to employees after retirement, making it a crucial component of the overall social security system in India.
The Employees Provident Fund Organisation’s top committee has decided to increase the interest rate on provident fund deposits to 8.25% for the financial year 2023-24, up from the current rate of 8.15%. This decision is part of an effort to enhance social security for India’s workforce, aligning with Prime Minister Modi’s vision.
How to Calculate EPF Interest Rate?
The interest rate of PF scheme is determined annually by the EPFO, subject to approval by the finance ministry. The epf interest rate is influenced by prevailing market conditions. Two methods, the step method and the formula method, can be used to calculate the interest rate, both yielding the same result.
Let’s consider an example with an pf interest rate of 8.15%:
Assuming a basic salary and dearness allowance of ₹ 40,000, the employee’s EPF contribution is ₹ 4,800 (12% of ₹ 40,000), and the employer’s EPF contribution is ₹ 1,468 (3.67% of ₹ 40,000). The employer’s EPS contribution amounts to ₹ 3,332 (8.33% of ₹ 40,000), but since the wage ceiling is ₹ 15,000, the excess contribution (₹ 3,332 – ₹ 1,250) is added to the EPF contribution, making it ₹ 3,550.
Hence, the total contribution by the employer and employee towards EPF is ₹ 8,350 (₹ 4,800 + ₹ 3,550).
Using the formula method: (8.15%/12) x ₹ 8,350 = ₹ 56.71, rounded to ₹ 57.
Using the step method: 8.15%/12 = 0.6791%, rounded to 0.68%. 0.68% x ₹ 8,350 = ₹ 56.78, rounded to ₹ 57.
The balance at the end of the year becomes the opening balance for the next year.
Moreover, individuals can utilise PF interest calculators available on third-party websites to calculate the epf interest rate conveniently.
EPF Interest Rate 2024 Calculation in a Financial Year
The table provided illustrates the interest rate calculation for an entire financial year as an example.
| Months | Basic Salary + DA | Employer’s Contribution (₹) | Employee’s Contribution (₹) | Total Balance at the End of the Month (₹) | Interest Generated (₹) |
| 1 | 40,000 | 3,550 | 4,800 | 8,350 | 0 |
| 2 | 40,000 | 3,550 | 4,800 | 16,700 | 57 |
| 3 | 40,000 | 3,550 | 4,800 | 25,050 | 113 |
| 4 | 40,000 | 3,550 | 4,800 | 33,400 | 170 |
| 5 | 40,000 | 3,550 | 4,800 | 41,750 | 227 |
| 6 | 40,000 | 3,550 | 4,800 | 50,100 | 284 |
| 7 | 40,000 | 3,550 | 4,800 | 58,450 | 340 |
| 8 | 40,000 | 3,550 | 4,800 | 66,800 | 397 |
| 9 | 40,000 | 3,550 | 4,800 | 75,150 | 454 |
| 10 | 40,000 | 3,550 | 4,800 | 83,500 | 510 |
| 11 | 40,000 | 3,550 | 4,800 | 91,850 | 567 |
| 12 | 40,000 | 3,550 | 4,800 | 1,00,200 | 624 |
The total EPF balance at the end of the year is determined by adding the total balance present at the end of the last month to the total pf interest generated. Hence, the total balance available in the account is:
₹ 1,00,200 + ₹ 3,743 = ₹ 1,03,943.
How to Use a PF Calculator?
- To begin, adjust your current age using the slider.
- Next, input your basic monthly salary and dearness allowance, with a maximum limit of ₹ 15,000.
- The minimum EPF contribution percentage is 12%, but you have the option to raise this by making voluntary contributions to the Provident Fund.
- Specify the retirement age, up to a maximum of 58 years.
- Include your known current EPF balance, if applicable.
- The EPF Calculator will display the projected EPF funds available to you upon retirement.
Information Required to Use a PF Interest rate Calculator
To determine their PF interest, an employee must input specific details into the PF interest calculator:
- Employee’s current age
- Current EPF balance
- Age of retirement
- Monthly basic pay
- Monthly dearness allowance
- Monthly EPF contribution percentage
- Expected salary hike
Once these details are provided in the calculator, it will generate the total pf interest that will be accrued by the time of retirement. This EPF calculator simplifies the EPF calculation process, making it more convenient for employees.
Tax Benefits on EPF Contributions
Under section 80C of the Indian Income Tax Act, 1961, employees can enjoy tax benefits by contributing to PF accounts. Contributions of up to ₹ 1 lakh to a PF account qualify for this tax benefit. If an employee contributes to an employee provident fund account for a minimum of 5 years, they will be exempt from a tax deduction on their contributions. However, if the duration of EPF contribution is less than 5 years and the employee withdraws their PF contribution before completing 5 years, income tax will be deducted at source (TDS). Employees need to be mindful of the 5-year threshold to avail full tax benefits on their PF contributions and avoid premature withdrawals that may incur TDS.
Conclusion
The Central Board of Trustees (CBT) is the decision-making body when it comes to EPFO. It was decided that the interest rate would be 8.25% in 2023-24, which is the highest in 3 years. It was increased from the interest rate of 8.15%. For the financial year 2022-23, the rate has been set at 8.15%. Previously, in March 2020, the rate was lowered to 8.5%, the lowest in seven years, from 8.65% the year before. EPF interest rates have fluctuated over the years, including 8.65% in 2016-17, 8.55% in 2017-18, and 8.8% in 2015-16. The rates were higher at 8.75% in 2013-14 and 2014-15, following 8.5% in 2012-13 and 8.25% in 2011-12.
Frequently Asked Questions
What is the current EPF interest rate?
The governing body of the Employees Provident Fund Organisation (EPFO), known as the Central Board of Trustees (CBT), has proposed an increase in the interest rate for provident fund (PF) deposits to 8.25% for the fiscal year 2023-24, up from the existing rate of 8.15%.
Is EPF compounded monthly?
Every month, contributions to the EPF are deposited into the EPF account, and interest is calculated monthly. Yet, the accumulated interest for the whole year is added to the account only at the fiscal year's conclusion
Is interest in EPF taxable?
Any interest earned on an employee's EPF contributions exceeding ₹2.5 lakh in a financial year is now subject to taxation. Additionally, this interest is liable for Tax Deducted at Source (TDS).
Is there a maximum limit on the EPF interest I can earn?
There is a limit on the EPF interest. For most employees, up to 2.5 lakhs is the limit for tax free interest.
How is the EPF interest rate calculated?
To determine the interest on your Employees Provident Fund (EPF), you use the step method, which involves taking the month-end closing balance, multiplying it by the prevailing PF interest rate, and then dividing the result by 12. For instance, the interest rate for the financial year 2016 was 8.8%, for 2017 it was 8.65%, and for 2018 it dropped slightly to 8.55%.
Can the EPF interest rate change from year to year?
The EPF interest rate changes from year to year. This year’s interest rate is 8.25% and is the highest in 3 years.
Till what time will I get EPF interest in my account?
EPF interest will be received after 3 years of retirement. When it becomes inoperative, there will be no interest provided.
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