You will learn here what EPF is and how you can calculate the EPF interests for a particular financial year.
EPF abbreviated as Employees Provident Fund. It is a fund collection from both employees and employers on a monthly rationale. This scheme gives financial support after retirement to those who are salaried persons.
The main scheme under the Miscellaneous Provisions Act, 1952 and the Employees provident Fund is the EPF. It is the Employees Provident Fund Organisation (EPFO) that supports this scheme. It is necessary for every such organisation that has more than 20 employees to get registered under this EPF Act.
In this scheme, an employee is deducted a small amount from their salary towards this proposal. However, it is necessary to quote that an employer also pays an equal amount of money. After the retirement of the employee, this monthly based contributed amount is responsible for the financial support to the employee.
In other words, we can say that this EPF is a post-retirement benefit plan, and its main function is to make the employee after retirement self-dependent.
What does EPF Calculator Mean?
The EPF calculator is a visualisation that displays the total money amount collected in your account of EPF at retirement. You can calculate your whole amount, which comprises your contribution and employers’ contribution, along with the interest of your investment.
There is a formula box in an EPF calculator where you can enter your present age, your monthly basic pay, your allowance, your contribution towards your EPF account and your retirement age till 58 years. After providing all this information, you can get the exact number of funds available at retirement with the help of this EPF calculator.
EPF interest rate
The EPFO, the central board of trustees, after meeting with the Ministry of Finance, reviews the interest rate every year. At the end of the financial year, mostly in February but can extend up to April, the review of the interest rate of the EPF is set for the financial year. For the financial year 2021- 22, the interest rate of EPF is 8.10%.
Contribution for EPF
Depending on the commodity that will contribute to EPF, the EPF contribution comprises two elements, I.e., the contribution of the employee and employer.
Towards the personal EPF account of an employee, an employee makes 12% of the main salary and dearness allowance contribution. The employee must contribute less than 10% if the organisation has less than 20 employees or the industry belongs to Beedi, Brick, Jute, Guar Gum or Coir factories.
The employer has to contribute about 8.33% towards the Employee pension scheme (EPS) employee’s account. Furthermore, 3.67% is summed up to the employee’s EPF account. Also, 0.50% of the contribution is made by the employer towards the EDLI employee’s account.
From the 1st of June 2018, the employer has to contribute @0.50% as some additional charges for administrative accounts. The minimum charge for administrative accounts is 500 rupees. If there is no such contribution for a particular month, the employer has to pay a charge of 75 rupees for that particular month.
How to Calculate Interest on EPF Balance?
The EPF is deposited into an employee’s account at the end of the financial year, but it is calculated monthly. The below given example will make you understand that you can calculate the EPF interest of the employee.
The following example explains:
- The calculation of EPF interest of the employee or the interest rate of EPF for a single worker.
- The contribution of EPF by both employee and employer.
Example of estimation of interest for a particular financial year:
If an employee has a main salary + Dearness Allowance = ₹ 15,000
- Contribution of the employee towards EPF = 12% of ₹ 15,000 = ₹ 1,800
- Contribution of Employer towards EPS = 8.33% of ₹ 15,000 = ₹ 1,250
contribution of Employer towards PF = Employees contribution—contribution of Employer towards EPS = ₹ 550
- Entire EPF contribution per month = ₹ 1,800 + ₹ 550 = ₹ 2,350
The interest rate of EPF for 2021-2022 is 8.10%.
When calculating interest, the interest acceptable per month is = 8.10%/12 = 0.675%
Inferring the enlisted employee service on 1st April 2021, donations start for the financial year 2021–2022 from April
For April, Cumulative EPF Contribution = ₹ 2,350
Interest on the EPF contribution for April = 0 as for the first month, no interest is applicable.
EPF balance at the edge of April = ₹ 2,350
Entire EPF Contribution for May = ₹ 2,350
Absolute EPF contribution for May = ₹ 4,700
Interest on the EPF donation for May = ₹ 0.675% *4,700 = ₹ 31.725
*The interest Will be deposited into employees’ EPF account at the end of the financial year, preferably from February to April, but it should be calculated monthly.
EPF Interest Rate for Inactive Accounts
The EPFO suggested stopping paying interest in the financial year 2011 -12 for those accounts where no contribution or negligible contribution was made from the last 3 years. However, in 2016, the decision was tossed back.
Accordingly, even the inactive EPF accounts from more than 3 years will be charged with interest attained as per the existing rates. However, no interest will be added to your account if your EPF account has served inoperative, I.e., when you have reached the retirement age of 58, and you have not withdrawn your EPF balance. In other words, after the scheme tenure ends, no contributed interest will be credited into your account.
Advantages of EPF
The main aim of the EPF is to provide some benefits to employees post-retirement. A little contribution from the employer and employee assists the employee in getting some financial strength after retirement so that the employee becomes financially independent. It feels like you are provided with future security. It is a sort of investment planned by both employer and employee.
The Employees Provident Fund has various advantages. Some of the important advantages are as:
- Corpus for Retirement:
The contribution made by an employee towards the EPF is 12% of his basic pay. So, each employee attaining over 5000 rupees monthly must pay 12% of the basic pay towards the EPF account contribution. This little contribution assists in accumulating a corpus. This corpus is responsible for providing you with financial stability and a type of security post-retirement. Due to this corpus, the employee remains a little tension free in his life.
- Emergency Corpus:
The scheme of EPF assists in surviving emergencies such as financial or medical or any other unknown emergency. This corpus will assist the employee in any such tensions arising in life.
- Premature Withdrawal:
The scheme of EPF comes with hassle-free and easy premature withdrawals. In case of emergencies, the employees can withdraw their payment partially. So, this scheme permits its users to withdraw their payments prematurely in emergencies.
- Tax Saver:
The earned interest from the amount in the case of the EPF scheme is freed from tax. EPF gives tax-free returns. Hence, any withdrawal after the fund maturity is not liable for tax. Also, under section 80 c of the Income tax act, any contribution from the employee side towards the fund of EPF is tax deductible.
Checking Your PF Balance
To check your PF balance, follow the below-mentioned steps.
Step 1. Go to the official EPF portal
Step 2. Select the state and branch office of your regional PF office
Step 3. Fill out the displayed online form by providing your details and the account number if EPF, present on your payslip
Step 4. After verifying all the provided information, submit the form
Step 5. If all the provided information is correct, your enrolled mobile number will get an SMS showing your balance in the EPF account.
Transfer EPF Money Online
If you want to transfer your EPF money online, follow the following steps.
Step 1. In the job change, EPF can be transferred online with the help of a Universal Account Number (UAN), which remains the same.
Step 2. Visit the official online portal of EPF Member and make your registration complete.
Step 3. Once logged in, you will get the credentials for login.
Step 4. Go to Online Transfer Claim Portal and claim for transfer of EPF by using the same login information.
Step 5. If you are competent to claim an online transfer of your EPF, you can go for it without submission of Form 13.
Step 6. Select the option ‘Request for Transfer of Funds’ and provide your previous details of employment as directed
Step 7. Get it verified by your new or previous employer
Step 8. After providing all the necessary details, you will get a pin on your registered mobile number
Step 9. A tracking ID gets created for you. You can use that ID to track your application status.
EPF is a very important part of an employee, as it will be proven beneficial for an employee after retirement. You should know all the things regarding EPF, how it works, who you have to contribute to and how much you have to contribute. You should be aware of the investment rate of EPF contribution for a specific financial year. However, if you want to get this information easily, Vakilsearch is here to assist you in every step. It is important to know how you can calculate your EPF amount for a particular financial year, and you can check your EPF balance. Keep it in mind that you link your UAN with your 10-digit mobile number so that you can manage your EPF account online.