EPF Interest Rate: How To Calculate Interest On Your EPF Account

The Employees’ Provident Fund (EPF) is a retirement savings scheme supported by the Central government, accessible to all salaried employees and private sector workers. Each month, an employee contributes 12 percent of their basic salary and dearness allowance towards EPF savings, with the employer matching this contribution.

The Employees’ Provident Fund (EPF) interest rate is declared annually by the Employees’ Provident Fund Organisation (EPFO). For the financial year 2023-24, the EPF interest rate is 8.25%.

EPF serves as a savings scheme for employees employed by organizations falling under the purview of the Employees’ Provident Fund Organisation (EPFO).

In accordance with the EPF scheme, both the employee and the employer are required to make equal contributions to the scheme.

Upon retirement, the employee receives a lump sum payment comprising their own contributions, the employer’s contributions, and accrued interest on both amounts.

Here’s how the EPF interest is calculated:

• The interest is compounded monthly. This means the interest earned in a particular month is added to the principal amount, and the interest for the next month is calculated on this higher amount.
• However, the interest is credited to your EPF account only once a year, on March 31st of the financial year.

Here’s a simplified way to understand the calculation (assuming monthly contributions):

• Divide the annual interest rate (8.25%) by 12 to get the monthly interest rate. (This is roughly 0.67%)
• Each month, add your monthly contribution to the previous month’s closing balance.
• Multiply the new balance by the monthly interest rate to calculate the interest earned for that month.
• Add the interest earned to the new balance to get the closing balance for the month.

For example, let’s say the initial contribution for the first month is Rs 10,000, with no interest accrued. In the following month, the opening balance doubles due to a fresh contribution. Therefore, the calculation considers Rs 20,000. The accrued interest would be Rs 137.5 (20000 x 8.25 percent)/12, rounded off to Rs 137. This process repeats for each subsequent month, with the final annual interest amount obtained by summing all monthly balances at the end of the year.

While this approach gives you a general idea, the actual calculation might involve some variations.

For a more precise calculation, you can use the EPFO’s online services or refer to a financial advisor.

Here are some additional points to remember:

The EPF interest rate is subject to change every year.

You can access your EPF account details and interest earned through the EPFO’s online portal.