Do you know how the interest on PF is calculated
EPFO: PF for employees is the best way to save for old age for a good future. Do you know how the interest on PF is calculated. How much money can you deposit in PF annually? Let us know about PF how your PF balance increases after interest.
PF contribution is necessary on more than 20 employees
Employee Provident Fund (EPF) is a way to save for retirement. Contribution to EPF has to be made if there are 20 or more employees in a company. In this, 12 percent of the basic salary is deposited by the employee and the employer deposits 8.33 percent in the Employees’ Pension Scheme and 3.67 percent in the EPF. Interest is paid on the basis of monthly operating balance which is added to the fund at the end of the financial year.
What is the current interest rate of PF?
The interest rate on EPF depends on the market conditions. The current interest rate on this is 8.5 percent, which is the same as the previous financial year.
interest calculation
Assuming an employee’s basic salary and dearness allowance as Rs 15,000 and interest rate 8.5 per cent, the interest can be calculated as follows.
Basic salary and DA = Rs 15,000
Employee contribution to EPF = 12% of Rs 15,000 = Rs 1,800
Employer contribution to EPS = 8.33% of Rs 15,000 = Rs 1,250
Employer contribution to EPF = 3.67% of Rs 15,000 = approx Rs 550
Total contribution = Rs 2,350
Current interest rate = 8.5% p.a.
Interest is calculated on monthly operating balance and hence interest per month will be = 8.5% /12 = 0.7083%
No interest on EPF for the first month
2nd month contribution = Rs 2,350
Total EPF balance = Rs 4,700
EPF contribution interest = Rs 4,700 * 0.7083% = Rs 33.29
How much can be deposited in PF annually,
Finance Minister Nirmala Sitharaman had recently told that the limit of tax free PF contribution has been increased to 5 lakh annually for employees. Earlier in the budget, it was proposed to increase this limit to Rs 2.5 lakh annually, which was later changed.
How much can be deposited in PF
Employees have to contribute 12% of PF basic salary. Private employees have less option to increase PF contribution but government employees have the option to increase this limit.
