Wednesday, October 20, 2021
HomeFinanceEPF BALANCE: HOW TO CALCULATE EMPLOYEES’ PROVIDENT FUND BALANCE AND INTEREST?

EPF BALANCE: HOW TO CALCULATE EMPLOYEES’ PROVIDENT FUND BALANCE AND INTEREST?

The Central Board of Trustees of EPFO has suggested an 8.51% annual rate of interest to be credited for EPF balance to subscribers accounts for the financial year 2020-21.

TECHNIQUES FOR THE CALCULATION OF EPF INTEREST RATES

The EPFO chooses the rate of interest for the EPF scheme on a yearly basis. The interest rate is dependent on the market situation and is vetted by the finance ministry. The interest rate can be measured either by using the step method or the formula method. The rate of interest for the FY 2020-2021 is 8.51%.

For example, we assume, EPF Basic salary and dearness pay to be ₹15,000 and with a current rate of interest of 8.5%

Example of estimation of interest for a financial year-

Basic Salary + Dearness Allowance = ₹ 15,000

Employee’s contribution towards EPF = 12% of ₹ 15,000 = ₹ 1,800

ALSO CHECK: Get a tremendous discount with Buy Wow Coupon Code and  Mamaearth Coupons

Employer’s contribution towards EPS = 8.33% of ₹ 15,000 = ₹ 1,250

Employer’s contribution towards EPF = Employee’s contribution – Employer’s contribution towards EPS = ₹ 550

Total EPF contribution every month = ₹ 1,800 + ₹ 550 = ₹ 2,350

The interest rate for 2019-2020 is 8.50%.

When calculating interest, the interest applicable per month is = 8.50%/12 = 0.7083%

Total EPF Contribution for the first month = ₹ 2,350

Interest on the EPF contribution for April = Nil (No interest for the first month)

EPF account balance at the end of April = ₹ 2,350

Total EPF Contribution for May = ₹ 2,350

Total EPF contribution for May = ₹ 4,700

Interest on the EPF contribution for May = ₹ 4,700 * 0.7083% = ₹33.29

THE INTEREST RATE ON INOPERATIVE EPF ACCOUNTS

As per the law, a provident fund (PF) account gets void in the case where an employee retires from service after accomplishing the age of 55 years or moves abroad forever or dies and an application for withdrawal of his accrued balance is not made within 36 months. Until that time, the interest amount will continue to accumulate on the PF corpus.

In Budget 2021, the government had offered to tax the interest earned on contributions made over and above ₹2.5 lakh. Currently, interest gained on PF contributions is tax-free. Even the accumulated PF balance is excluded from tax if a person has provided continuous service for a period of five years or more.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Latest

EPFO New Rule: How much interest will you get on your PF deposit and how is the interest rate added? Calculate like this

PF for employees is the best way to save for old age for a good future. Do you know how the interest on PF...

Know how much money is in your PF account sitting at home, know through an SMS or missed call

Many people have lost their jobs during the Corona period. Many people have also had to withdraw their Provident Fund (PF) money, but there...

Subscribe

* indicates required