In this article, we will discuss the significance of the EPF as well as the current EPF interest rates. Read on to learn more!
According to the Employees Provident Fund and Miscellaneous Act of 1952, an EPF is a retirement benefits scheme where employees are required to make a fixed monthly contribution, and employers are also required to make an equal monthly contribution.
The Employee Provident Fund Organisation manages the scheme (EPFO). At retirement and throughout the service time, the employee receives a lump sum payment that includes both their own and the employer’s contributions, together with interest on both (under certain circumstances as stipulated).
| Year | EPF Interest Rate |
| 2016-17 | 8.65% |
| 2017-18 | 8.55% |
| 2018-19 | 8.65% |
| 2019-20 | 8.65% |
| 2020-2021 | 8.55% |
| 2021-2022 | 8.55% |
| 2022-2023 | 8.10% |
The principal sum and any accumulated interest are not subject to income tax when withdrawn, making this a desirable retirement option for those in the salaried class. The Scheme applies to all organisations with 20 or more employees, however, some organisations are still covered, subject to restrictions and exemptions, even if the minimum staff need is not fulfilled. EPS interest rate changes every year.
Current & Historical EPF Interest Rates
After consulting with the Ministry of Finance, the Central Board of Trustees of EPFO reviews the EPF interest rate once a year. The 2022 PF interest rate is set at 8.1%. Here are the provident fund interest rates over the previous five years: This EPF interest rate changes every year. The change in interest rates depends on various factors.
Plan your future with ease using our EPF calculator. Calculate your returns with our PF interest calculator and make informed decisions.
Employees Provident Fund (EPF) Interest Rates 2022 – 2023
The interest rate for EPF is reviewed annually. For the fiscal year 2022-2023, the current EPF interest rate is 8.10%.
The interest rate is calculated for the month-by-month ending balance first, and subsequently for the entire fiscal year after the EPFO announces the interest rate for it. The year in which the new interest rates are published remains valid for that following fiscal year, i.e., from April 1st of one year to March 31st of the following year. Here are few key points to remember about the EPF interest rate:
The interest rate of 8.10% has come into effect and will apply to EPF deposits made between April 2022 and March 2022. Even though the interest is calculated monthly, it is only deposited to the EPF account once a year on March 31st of the applicable fiscal year.
The transferred interest is then added to the next month’s balance, i.e., April’s balance, and is then used to calculate the interest. If no contributions are made to an EPF account for 36 months in a row then the account becomes dormant or inoperative. Employees who have not reached retirement age might earn interest on their inactive accounts.
Money deposited into an inactive employee retirement account does not earn interest. The tax rate applicable to the member’s slab applies to interest earned on inactive accounts. On the amounts paid by the employer to the Employees’ Pension Scheme, the employee will not be paid any interest. A pension is granted out of this sum, though, beyond the age of 58.
Employees Provident Fund (EPF) Contribution by Employee and Employer
There are two components of the contribution, depending on the organisation making the EPF contribution – employee & employer contribution. The employee makes a contribution to their EPF account equal to 12% of their base income plus dearness allowance (DA).
In cases where there are fewer than 20 employees and/or if the company is in a certain industry, such as jute, beedi, brick, etc., the employee is required to make a lower contribution of 10%. The employer contributes an equal amount to the scheme (12% of the employee’s basic salary plus DA). The remaining amount, 3.67%, is put into the employee’s EPF account.
Of this employer contribution, 8.33% goes to the Employee Pension Scheme (EPS), up to a monthly ceiling of 1,250 if the employee’s pay is ₹15,000 or above. Additionally, the employer makes a 0.50% contribution to the employee’s Employees’ Deposit Linked Insurance (EDLI) account.
It is important to note that the employee has the option to voluntarily contribute more than the minimum statutory amount of 12%, known as a contribution to the Voluntary Provident Fund (VPF), which is tracked independently.
The VPF similarly offers tax-free interest, but if the employee decides to participate, the employer is not compelled to make any contributions. An employee may be eligible to earn tax benefits for contributions made to PF accounts in accordance with Section 80C of the Indian Income Tax Act of 1961. This benefit is available for PF account contributions up to ₹1 lakh.
If you make contributions to an employee provident fund account for five years, you won’t be able to deduct taxes from them. But if you withdraw your PF payment before it has been in place for 5 years and the length of your EPF contribution is less than 5, income tax will be deducted at the source (TDS).
How to Calculate PF Interest
The interest rate is calculated each month, but it is only deposited into the account at the end of the fiscal year. The interest calculation on the EPF Registration of the employee is explained by the provided example.
Basic Salary + DA = ₹30,000
Employee’s contribution towards the EPF = 12% of ₹ 30,000 = ₹ 3,600
Employer’s contribution towards the EPS (subject to a limit of 1,250) = ₹1,250
Contribution from the employer to the EPF= (₹3,600 – ₹1,250) = ₹2,350
Every month’s total EPF contribution = ₹3,600 + ₹2350 = ₹5,950
The EPF interest rate for 2022–2023 is 8.10%. The interest is applicable per month.
When calculating interest, it is = 8.10%12 = 0.00675%.
Just to be clear, while the interest on the provident fund will be calculated at the end of each month, it won’t actually be credited until the end of the fiscal year. Assuming the employee joined service on April 1 2022, contributions start for the financial years 2022–2023 start from April 2022 only.
Total April Employees Provident Fund Contribution= ₹5,950
For April, interest on the EPF contribution = Nil (No interest for the first month)
EPF account balance at the end of the month of April = ₹5,950
EPF Contribution for May = ₹5,950
Total EPF account balance as of May = ₹11,900
EPF contribution interest for May = ₹11,900 * 0.7083% = ₹84.29
Conclusion
We hope that by reading the information above, one has a better understanding of what EPS is and what the current PF interest rate are. If you are also a small business owner with 20 or more employees in your company, then our experienced team at Vakilsearch can help you carry out your online EPF registration process in a hassle-free way within just a few clicks!
