HOW TO CALCULATE EPF INTEREST
How to Calculate Interest on EPF
EPF interest is calculated every month
but is deposited in the account at the end of the financial year. The following
example explains the interest calculation on EPF of the employee:
Basic Salary + Dearness Allowance = ₹ 15,000
Employee’s
contribution towards EPF = 12% of ₹ 15,000 = ₹ 1,800
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 2018-2019 is 8.65%.
When
calculating interest, the
interest applicable per month is = 8.65%/12 = 0.7083%
Assuming
the employee joined a service on 1st April
2018, contributions start for the financial year 2018 – 2019 from April
|
Total EPF Contribution for April = ₹ 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 will be calculated
every month but will be deposited only at the end of the financial year (on 31st March
2019 in this case).
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Milan Tomic
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