EPF Calculation Formula: How to Calculate PF Balance?

Computing your annual EPF returns has become relatively easy these days with an online EPF calculator. Have a look at the detailed process mentioned below.

Overview

An online EPF calculator is a popular tool that can seamlessly compute your annual EPF estimates in no time. With the whole process of digitalization of the country, the Government is also aiming to shift people’s perspectives online. In this scenario, using a EPF calculation formula is a great idea.

It will help you calculate your contributions and add the total with the required interest rates. So please eliminate your stress of computing EPF on paper, and start saving it online. In this blog we will discuss the PF calculation formula, Steps To Follow For Online EPF Calculation, Advantages of the EPF Calculator.

Add both company and employee contributions to determine your provident fund contribution. The employee contributes 3.67% of the PF balance, compared to the employer’s 12% contribution. Based on the employee’s basic salary, the employer contributes 12% of the PF balance.

Calculating Provident Fund (PF) is an essential aspect of employee benefits. PF is a government-mandated retirement savings scheme in India, where both the employer and the employee make regular contributions towards the employee’s retirement savings. The PF calculation formula determines the amount of money an employee receives after retirement. In this comprehensive guide, we’ll walk you through everything you need to know about the EPF calculation formula.

What is EPF Calculator?

An EPF calculator is a computational tool utilized to assess the amount of money that will accumulate in one’s EPF account upon retirement. This simulator computes the lump-sum value, which encompasses both the individual’s contribution and the employer’s contribution, including the accrued interest on the investment.

To operate the EPF calculator, you must input various parameters in the formula box. These parameters include your current age, basic monthly salary, dearness allowance, contribution to the EPF, retirement age, and EPF balance if applicable. After providing the necessary information, the EPF calculator will generate a report showcasing the funds available in your EPF account at the time of your retirement, which can be up to 58 years of age.

How Does an EPF Calculator Work?

The EPF calculator operates based on EPF calculation formula. For example, suppose an individual’s basic salary and dearness allowance sum up to Rs 14,000, and the individual’s contribution towards the EPF is 12% of the total amount, which translates to Rs 1,680. In that case, the employer’s contribution would be 3.67% of Rs 14,000, equivalent to Rs 514, and the employer’s contribution towards EPS is 8.33% of Rs 14,000, equal to Rs 1,166. Hence, the total contribution from both the employer and employee towards the employee’s EPF account amounts to Rs 2,194.

Assuming the interest rate of 8.1% for FY 2022-23, the interest rate for each month becomes 8.1%/12, which is 0.675%. For example, if an employee joined the Firm XYZ in April 2019, the total EPF contribution for April will be Rs 2,194. Nonetheless, the EPF scheme does not pay any interest for April. The total EPF contribution for the following month, May, would be Rs 4,388, i.e., Rs 2,194 plus Rs 2,194. In turn, the employee receives an interest amount of Rs 31.08, i.e., Rs 4,388 multiplied by 0.70833%, for May. The same calculation methodology is applied for the succeeding months.

What is EPF Calculation Formula?

The PF calculation formula is used to calculate the amount of money an employee receives after retirement. Both the employer and the employee make regular contributions towards the employee’s retirement savings. The contributions are made to the Employee Provident Fund (EPF) account, which is a government-mandated retirement savings scheme in India. The percentage of contributions is calculated from the employee’s basic salary and allowance. The EPF calculation formula is based on three components, namely:

1. Basic Salary: This is the salary paid to an employee without any additional benefits or allowances.
2. Dearness Allowance: Dearness allowance is an allowance paid to an employee to compensate for the increased cost of living due to inflation.
3. Employee Contribution: The employee contributes 12% of their basic salary and dearness allowance towards the EPF account.

The employer also contributes an equal amount, i.e., 12% of the employee’s basic salary and dearness allowance. However, the employer’s contribution is divided into two parts, namely:

1. Employer Provident Fund (EPF) Contribution: The employer contributes 3.67% of the employee’s basic salary and dearness allowance towards the EPF account.
2. Employee Pension Scheme (EPS) Contribution: The employer contributes 8.33% of the employee’s basic salary and dearness allowance towards the EPS account.

PF Calculation Formula Example

Let’s consider an example to understand the EPF calculation formula better.

Suppose Mr. A’s basic salary is Rs. 20,000, and his dearness allowance is Rs. 5,000.

Then, Mr. A’s contribution towards the EPF account = 12% of (20,000+5,000) = 12% of 25,000 = Rs. 3,000.

The employer’s contribution towards the EPF account = 3.67% of (20,000+5,000) = 3.67% of 25,000 = Rs. 917.5.

The employer’s contribution towards the EPS account = 8.33% of (20,000+5,000) = 8.33% of 25,000 = Rs. 2,082.5.

The total contribution towards

EPF returns are just the overall estimates of three vital points:

1. Employee’s contribution to EPF
2. Employer’s contribution to EPF
3. Interest rate (fixed by the Government)

Know what awaits in retirement. Calculate your PF instantly using PF Maturity Calculator!

However, there are some rules that you need to know while computing your annual EPF using an online PF calculation formula. They are as follows:

• If your monthly gross salary is less than or equal to ₹15,000 after using EPF calculation formula, your employer will contribute 3.67% of the salary amount for EPF. The rest, 8.33%, goes towards the Employee’s Pension Scheme (EPS).
• If your monthly salary exceeds ₹15,000, your employer’s contribution will equal the difference between the employee’s contribution to EPF and the employer’s contribution to EPS. 
• The interest rate for FY 22-23 is fixed at 8.10% by the Government. It is subject to frequent changes, so keep an eye on the current rates.
• An employee’s contribution is 12% of the total monthly salary.

Therefore, you must be very careful while filling in the details online. If you miss out on any vital point, it can lead to massive changes in your PF calculation Formula of EPF, and the whole process can go wrong. 

Steps to Follow for Online EPF Calculation

You must follow specific steps to ensure that the online process for EPF calculator is accurate. However, they are simple and easy to follow; once you understand them, nothing can go wrong.

Here are the steps in detail:

• Mention your personal details like name, current age, and retirement age as per the Formula of EPF.
• Add your monthly salary. It should include both basic pay and Dearness Allowance (DA). It would be best if you also mentioned the expected annual increment in your salary as per pf calculation formula.
• Fill in the details of contributions made by the employer and employee. Make sure you get it right because the whole calculation can go wrong if you exchange the values. Keep in mind that the percentage of contributions needs to be computed separately.
• Add the interest rate as fixed by the Government. As of now, it is 8.10%. As the interest rate is also a part of Epf calculation formula.

While you fill in the details, there are certain things to remember. Firstly, you must go through the online process over and over again. Try a sample first, if necessary. Secondly, you need to ensure that there is no error in the details mentioned by you. In case of a minor issue, your entire process can go wrong. So check and re-check to be sure. Lastly, you must know that you can keep the record as a draft stored in the EPF calculator online. In case you miss out on any valid documents, you can always come back to editing. Make sure that you do not hurry. It is always better to complete the whole process in fragments and then check it in detail.

Advantages of Using an Online EPF Calculator

Many people argue why online EPF calculations are not trustworthy or valid. Instead, they prefer the pen-and-paper method. However, these myths take away your capability to reduce the workload. Once you use an online EPF calculator, you will realise the difference. It not only reduces the load but also provides numerous features to save, store, and extract your documents as and when required.

Here are some of the benefits to look at:

• It is easy to use and takes much less time. An online PF calculation formula has inbuilt features that cover up the details automatically. You need to present your customised details to complete the process.
• The entire process is accurate. It will seamlessly bring out the EPF estimates once you fill in all the details. You can eliminate the unnecessary trouble of formally documenting everything on paper.
• The EPF calculators are trustworthy. You will be able to save your documents without any risk of exposure. On the other hand, paperwork often leads to trouble if it falls into the wrong hands. The encrypted features make the applications much more secure to enter all details.
• You can plan out your investments shortly by knowing the EPF estimates online. It will give you a clear idea about your liabilities and thus help you make crucial decisions.
• You can also plan out your retirement in a better way. For example, an EPF estimate will help you know where you stand after retirement. Technically, you will get to know every other detail of your EPF returns once you fill in all the details. Therefore, you will get the best retirement plan once you manipulate your EPF estimates properly.
• If you are eager for a promotion or hike in your salary, you can work on it using your EPF calculation formula. The value you get for a month will add up uniformly in a year, and so forth. You can quickly bring up new plans to increase the rates and values of your contributions.

Steps to Calculate the EPF Amount at Retirement

To determine the accumulated amount at retirement, individuals should follow these steps:

• Step 1: Fill in your current age and retirement age in the designated box, with a maximum retirement age of 58 years.
• Step 2: Input your basic monthly salary and the expected annual average increment in basic salary.
• Step 3: Provide both the figures for employer’s contribution and employee’s contribution towards the retirement fund.
• Step 4: Finally, specify the interest rate, which is decided by the government, and is accrued on the EPF (Employee Provident Fund) balance.

Once all the necessary data is provided, the EPF calculation formula will execute the computation process and display the resulting accumulated amount.

Uses of EPF Calculator

The EPF calculator enables individuals to effortlessly discover and comprehend the following information:

1. The computation of their EPF corpus at retirement.
2. The determination of their EPF corpus amount.
3. An estimation of the required contributions to achieve a specific return after retirement.
4. Setting financial goals with the aid of this calculator.
5. Facilitating financial planning by adjusting various factors in the calculator.
6. Identifying opportunities to increase their contributions towards retirement using this calculator.

PF Calculation Formula FAQs

How is PF calculated from salary?

You and your employer must contribute 10% or 12% of your basic salary to EPF. However, if you are a woman, your employer will contribute 12% of your basic salary during this period.

Is PF based on basic salary?

It is calculated based on the gross salary of employees with basic pay below ₹6,500, that the employer contributes 12% towards the PF balance.

How to calculate EPF with an example?

For the employer to contribute 8.33% of 14,000 towards EPS, Rs 1,166 is the amount. Total contributions by the employer and the employee to the employee's EPF account are ₹1,680 + ₹514 = ₹2,194.

Will the EPF calculator show results without the data of the age of retirement of an individual?

No, the EPF calculator requires the data of an individual's current age and the desired age of retirement to compute the results accurately. Without this information, the calculator cannot determine the accumulated amount at retirement.

Does the EPF calculator help to reduce mistakes?

Yes, the EPF calculator is designed to minimize errors in EPF calculations. By automating the computation process based on the provided data, it eliminates the risk of manual calculation mistakes, ensuring accurate and reliable results.

Can individuals save time by using the EPF calculator?

Absolutely! The EPF calculator streamlines the calculation process, saving significant time and effort for individuals. Instead of performing complex calculations manually, they can simply input their data into the calculator, and it will quickly generate the results related to their EPF corpus, contributions, and potential returns.

How is PF calculated from salary?

The calculation of Provident Fund (PF) from salary involves contributions from both the employee and the employer. Typically, 12% of the employee's basic salary is deducted and contributed to the PF account, and an equal amount is contributed by the employer. The total contribution is then deposited into the employee's EPF account.

How is EPF calculated with an example?

Here's an example of how EPF can be calculated:
Suppose an employee's basic monthly salary is 5,000, and the EPF contribution rate is 12%. The employer also contributes an equal amount.
Step 1: Calculate the employee's monthly EPF contribution:
Employee's EPF contribution = 12% of 5,000 = 600
Step 2: Calculate the employer's monthly EPF contribution:
Employer's EPF contribution = 12% of 5,000 = 600
Step 3: Total monthly EPF contribution:
Total EPF contribution = 600 (employee's) + 600 (employer's) = 1,200

Conclusion

As stated above, you will get to know every detail of your EPF returns once you start calculating from bits and pieces. The online EPF calculators make the process easier with all the complex calculations done in no time. Plan your pre and post-retirement life strategically by looking at your EPF estimates. If you cannot make ends meet, you can always consult Vakilsearch. The experts will help you get rid of technical problems easily. PF calculation formula online with the best applications and save your data for the future.

Helpful Links

• How to Calculate PF Amount in Member Passbook?
• PF Withdrawal Online Process
• How to Create a UAN Number for the PF Account?