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The Central Board of Trustees, assisted by the Employee’s Provident Fund Organisation (EPFO), reviews the EPF interest rate at the end of each financial year, along with the Ministry of Finance. The usual time of reviewal of the interest rate is February, but may extend till May. The EPF interest rate, as in April 2019, is 8.65%.
The interest rate on EPF is calculated on your income every month, but it gets deposited in the account only at the end of the financial year. The following will give you a clear idea about how EPF interest rate is calculated on your monthly income:
Let’s say Mr. Sharma’s Basic Salary + Dearness Allowance is Rs. 20,000
Employee’s contribution towards EPF = 12% of Rs. 20,000 = Rs. 2,400
Employer’s contribution towards EPS = 8.33% of Rs. 20,000 = Rs. 1,666
Hence, according to the above calculation
Employer’s contribution towards EPF = Employee’s contribution towards EPF – Employer’s contribution towards EPS
Employer’s contribution towards EPF = Rs. 734
Total EPF contribution for April = Rs. 2,400 + Rs. 734 = Rs. 3,134
The EPF interest rate for the FY 2018-2019 is 8.65%. Therefore, the monthly EPF interest rate would be = 8.65%/12 = 0.7208%
Let’s discuss how an employee’s monthly contribution towards EPF will be calculated when the employee has joined the organisation in May. The employer and employee will contribute Rs. 1,800 each towards EPF. Out of the Rs. 1,800 that will be contributed by the employer, Rs. 550 will go towards EPF. The balance Rs. 1,250 will get contributed towards EPS.
Similarly, the employer’s contribution is as shown below:
What is the EPF interest rate?
The EPF interest rate as per April 2019 is 8.65%.
Is there any interest on EPF?
Yes, interest amount is payable on EPF, provided your account is not dormant.
Is EPF eligible for compound interest?
For EPF, compound interest is payable on the EPF balance of an employee outstanding against his/her name as on 1st April of a financial year.
Will I get interest on my PF amount after leaving job?
As per new regulations passed in 2016, a PF account is termed as inoperative when an employee does not withdraw the balance in his/her PF account within 36 months of retirement, post reaching 55 years of age. Hence, even after a professional leaves a job, the PF account continues to attract interest and is not considered to be inoperative till the time he/she reaches 55 years of age.
How PF is calculated on salary?
An equal amount – 12% of Rs. 15,000 or 12% of (Basic Salary + Dearness Allowance, if applicable) – is contributed to PF by the employer as well as the employee.