The Employees Provident Fund & Miscellaneous Provisions Act of 1952 established the Employee Provident Fund (EPF), a retirement benefits program. Those who are employed are eligible for the program. By the EPF plan, the employer provides a specific amount, which is then deposited into the worker’s EPF account. The employer also funds the employee’s EPF account.
The employee receives a lump sum corpus of EPF upon retirement, which includes the annual interest credit and the contributions made by the employer and the employee. The government periodically reviews the interest rate on EPF accounts. The interest rate announced for the fiscal year 2022–2023 is 8.15%.
EPF Interest Rate Of 2023
The EPF has fixed the interest rate for 2022-23 at 8.15%. For all deposits made between April 1, 2022, and March 31, 2023, this rate is valid.
Contribution Breakdown If Salary Reaches Rs. 15,000
If an employee earns at least Rs., the employer divides the 12% payment into two equal parts. 15, 000 in salary.
The EPS account receives 8.33% of the Rs. 15,000. i.e., Rs 1,250 monthly, plus any remaining.
Any monthly amount that exceeds Rs 1,250 is deposited into the EPF account.
For Example: If an employee makes Rs. 50,000 in base pay plus dearness allowance:
- Employee contribution to EPF (12% of Rs.50,000): Rs. 6,000.
- Employer contribution to EPF (3.67% of Rs.50,000): Rs. 1,835.
- Employer contribution to EPS: Rs. 1,250.
Since 8.33% of Rs., we have deposited 1,250 rupees to the EPS account and transferred the remaining 2,915 rupees to the EPF account. 50,000 is Rs. 4,165.
The EPF account has a total balance of Rs. 10,750.
(For example, employee contribution of Rs. 6,000 plus employer contribution of Rs. 1,835 plus employer surplus contribution of Rs. 2,915)
Employee Salary Contribution Rate Up To Rs. 15,000
- Employee contribution to EPF: 12% of salary.
- Employer contribution to EPF: 3.67% of salary.
- Employer contribution to EPS: 8.33% of salary subject to a ceiling of Rs. 15,000 salary, i.e. Rs. 1,250.
Information Required For Calculating The EPF Interest Rate
The information below is needed for calculating EPF interest:
- The current age of an employee.
- Current EPF balance.
- Monthly basic and dearness allowance of up to a maximum of Rs.15,000.
- Percentage of contribution to EPF.
- Retirement age.
Each month, the EPF contribution is credited to the EPF account, and interest is calculated monthly. However, after the fiscal year, the entire amount of interest earned will be credited. 8.15% is the interest rate for FY 2022–2023. As a result, the interest rate used to calculate interest will be 0.679%, or 8.15%/12, for each month.
Calculation Of EPF Interest Rate
In the previous situation, the total EPF contribution for the first month of service registration is Rs. 10,750.
Interest Rate: 8.15% / 12 months = 0.679%
The first month’s interest on the EPF contribution is zero, and the account balance after the first month is Rs. 10,750.
The second month’s EPF contribution was Rs. 10,750.
The second month of service collected a total amount of 21,500.
Interest earned on the second month’s EPF contribution is equal to Rs. 21,500 * 0.679%, or Rs. 145.985.
At the end of the second month, the total EPF contribution balance was Rs. 21,500.
The third month’s EPF contribution is Rs. 10,750.
The total sum accumulated in the third month was 32,250.
Interest on the second month’s EPF contribution is equal to 32,250 * 0.679%, or Rs. 218.997.
The balance of all EPF contributions after the third month was Rs. 32,250.
Performing an equivalent calculation for the remaining months of the year.
The EPF balance at the end of the year will be determined by the amount of employer and employee contributions, along with the interest collected each month during the year.
Also, the EPF account’s initial amount for the second year will be equal to its ending value from the previous year. The initial balance carried forward from the previous year will be used in the calculation of EPF interest for the second year.
Calculate your EPF fund after retirement by EPF Calculator
Note:
- Salary consists of dearness allowance as well as base pay.
- Ten percent of wages is the lowest payment due if the entity is a designated entity or employs fewer than twenty people.
Employer’s EPF Contribution If An Employee’s Pay Is Above Rs 15,000
If an employee makes more than Rs. 15,000 per year, the company may choose to use one of the following strategies:
- Employers have the option to limit their contribution to 12% of base pay and dependent care expenses, or
- If the employee’s pay exceeds Rs. 15,000, he may match their contribution.