EPF interest rate 8.25% for 2024-25: What’s actual interest amount you will get in your EPF account now? Here’s how to calculate it Once the interest rate is notified by the finance ministry, the EPF account holders will get the interest credited to their EPF account. Very few EPF account holders are aware how EPF interest is calculated
The Employees Provident Fund Organisation (EPFO) has recommended an 8.25% interest rate for the financial year 2024-25, as sources told The Economic Times. If announced officially, this interest rate is the same as that announced for the previous financial year, i.e., FY 2023-24.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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However, few individuals are aware of how EPF interest is calculated. Here is how EPF members can calculate the interest they earn on their monthly EPF deposits or contributions. This will help them cross-check the interest that will be credited to their EPF account in the future.
— PTI_News (@PTI_News) How EPF interest is calculated
According to para 60 of the EPF Scheme, 1952, interest is calculated on the monthly running balance, even though the interest is credited at the end of the financial year. This is similar to how PPF interest is calculated and credited to PPF accounts of PPF subscribers.Generally, the announcement of the interest rate for the EPF happens in the last month of the financial year for which the interest rate is applicable. However, the credit of EPF interest takes time. This is because the proposal is sent by the Labour Ministry to the Finance Ministry. The Finance Ministry has to agree and notify the same. Once it is notified, the process of crediting interest in accounts of EPF members starts.
Calculation of interest on EPF deposits with example
Here is an example of how to calculate interest on EPF deposits. Suppose the balance in the EPF account as of April 1, 2024, is Rs 2 lakh. The basic salary is Rs 40,000 per month for the FY 2024-25. According to EPF scheme rules, 12% of employees' basic wages goes into the EPF account. The employer is also required to make matching contributions. However, out of the employer’s 12% contribution, 8.67% goes to the Employees Pension Scheme (EPS) account with a limit of Rs 1,250 per month. The balance is credited to the EPF account.Monthly basic
Rs 40,000
Employee’s EPF contribution (40,000X12%)
Rs 4,800
Employer’s EPF contribution
Rs 3,550
Employer’s EPS contribution
Rs 1,250
Total EPF contribution (Employee + Employer)
Rs 8,350
Hence, in FY 2024-25, Rs 8,350 would have been deposited monthly into the employee’s EPF account.
Month
EPF deposit (In Rs)EPF deposits for interest calculation (In Rs)Monthly interest (In Rs)Apr-2483502083501432.41May-2483502167001489.81Jun-2483502250501547.22Jul-2483502334001604.63Aug-2483502417501662.03Sep-2483502501001719.44Oct-2483502584501776.84Nov-2483502668001834.25Dec-2483502751501891.66Jan-2583502835001949.06Feb-2583502918502006.47Mar-2583503002002063.88Total EPF interest in FY 2024-25 20977.69
From the example above, the total interest of Rs 20,977.69 will be credited to the EPF account. This interest will be added to the opening balance of Rs 2 lakh. From the next financial year, the interest amount calculated per month will change as the opening balance has changed. The interest amount will also change if the interest rate for the next financial year changes. Further, the monthly EPF deposit will also change if the employee’s basic salary is revised due to appraisal or any other reason.
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This story originally appeared on: India Times - Author:Faqs of Insurances
