Latest PF interest rate & its procedure to calculate
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Latest PF interest rate & its procedure to calculate

In this post, we will look at the latest PF interest rate and how it has changed over the years. Also, we will discuss the detailed procedure of calculating the PF interest rate.

Current PF interest rate [2019 update]

The Employees’ Provident Fund Organisation (EPFO) has updated the PF interest rate applicable for the FY 2018-19 is 8.65%. In the previous Financial Year, the PF interest rate was 8.55%.

Change in PF Interest Rates Over Years

The PF interest rates also keep changing every year. In the graph below, you can see the EPF rate history over the past 6 years.

The Financial Year 2017-18 had the lowest PF interest rate (8.55%) since the Financial Year 2012-13 (8.5%). However, both Financial Year 2016-17 and current Financial Year have a PF interest rate of 8.65%.

According to the opinion of EPFO, there would be an excess of Rs.151,67 crore because of implementing PF interest rate as 8.65% for the current FY 2018-19.

Change in PF interest rate over years

Calculation of PF Interest Rate

The monthly PF contribution get accumulated, and it will also earn interest over time in your PF account. In the section, we will also see how you can calculate the monthly PF interest.

Let us first know how to calculate interest in the EPF contribution.

The calculation of the actual interest received depends upon the salary of an employee and also on the break-up of employer’s PF contribution.

  • Contribution by an employee – Contribution towards EPF is deducted from the employee’s salary. This is 12% of the basic salary of the employee.
  • Contribution by an employer The contribution made by the employer is 12% of the basic salary of the employee. However, this is divided into:
    • Employee Pension Scheme (EPS) – 8.33%
    • Employee’s Provident Fund (EPF) – 3.67%

As we all know, if Basic+DA is less than Rs.15,000 then both the employer and employee contribution will be the same. If it exceeds Rs.15,000, then you have an option either contribute based on the original amount or restrict the calculations to Rs. 15,000.

Example

Now let us see, for example, Siddharth who has just joined the organisation in June at a monthly salary of Rs 12,000 (Basic+DA). We will calculate the interest on his EPF earnings. We can see the monthly deductions and applicability of interest in the table below.

MONTH EMPLOYEE CONTRIBUTION(12%) EMPLOYER CONTRIBUTION (3.67%) BALANCE AT THE END OF THE MONTH INTEREST EARNED
June 1440 440.4 1880.4 Nil Just joined
July 1440 440.4 1880.4+1880.4=3760.8 1880.4*8.75%/12=Rs.13.72
August 1440 440.4 3760.8+1880.4=5641.2 3760.8*8.75%/12=Rs.27.42
September 1440 440.4 5641.2+1880.4=7521.6 5641.2*8.75%/12=Rs.41.138
October 1440 440.4 7521.6+1880.4=9402 7521.6*8.75%/12=Rs.54.84
November 1440 440.4 9402+1880.4=11282.4 9402*8.75%/12=Rs.68.55
December 1440 440.4 11282.4+1880.4=13162.8 11282.4*8.75%/12=Rs.82.26
January 1440 440.4 13162.8+1880.4=15043.2 13162.8*8.75%/12=Rs.95.97
February 1440 440.4 15043.2+1880.4=16923.6 15043.2*8.75%/12=Rs.109.69
March
(Total EPF at the end of the year)
12960 3963.6 16923.6+1880.4=18804 493.58

So, the total interest Siddharth had received for his EPF contributions from June to March is Rs.493.58.

The interest on EPF is calculated for every month and given at the end of the financial year.

IMPORTANT POINTS TO REMEMBER WHEN CALCULATING EPF INTEREST RATE

  • The employer shows the EPF contributions with respect to the salary due.
  • Interest amount received on EPF is rounded off to the nearest point before crediting it to your EPF account.
  • In the unfortunate event of a death of an employee, the interest is payable till the month preceding the month in which death occurred.

So, we have come to an end of this post regarding the detailed procedure of calculating PF interest rate and change in interest rates. We hope you found it helpful.

Related Links:

If you have any doubts or queries kindly drop them in the comment section below.

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11 Comments

  • To which period is the EPF interest announced in feb 2018 (8.55%) applicable? Is it retrospectively applicable from Apr 2017 to March 2018? If so members who would have retired in say Sept 2017 would have their interest calculated at what rate? It would not have been 8.55% as it was announced in Feb 2018.

    • Hello Sir,
      For the FY 2017-18 the interest will be calculated on 8.55%. So for a person who retired in Sept 2017, it would be the same i.e., 8.55%.

  • If I get cheque of rs. 3526 per month . How much will be the part of Employer and emloyee at their interest rates ?

    • Dear Sir,
      PF is applicable at 12% on your monthly BASIC + DA. Employer and Employee will be contributing equally to this.
      When computing interest, the declared rate will be applicable on whole of employee share and 3.67% of employer share
      i.e. if every month you contribute Rs. 1000 your employer too will contribute Rs. 1000. The interest will be calculated on 1000+367=1367.

  • Whether in case any one drawing salary of 20000 and his basic salary is Rs 6000 then PF needs to be paid on Rs 6000 or in Rs 15000?

    • Dear Sir,
      The PF contribution is on Basic + DA. Hence, the PF will be on 6000 and DA if available.

  • hello sir
    i have left my last job in the year 2017 June , from that time i am not working , what is the pattern of interest i will receive , will i get interest till june 2017 , or shall i get interest till july 2018 , the day i claimed my pf amount .
    Also for final pf settlement , i have worked in 3 companies all have deducted pf but did not joined combined my uan , in last company before quitting i linked all the pf account into my last pf account .
    So i am not sure how much interest i will gain , suppose on june 2017 my total pf accumulated was 75,000+35,000 pension . will i get interest @ 8.55% for 75,000 from june-2017 to july 2018 , or it shall be limited to june 2017.
    means how should i calculate the interest on final pf settlement , when no pf is credited to my pf account from last one year .

    • Hello sir,
      1. PF amount will be taken up to last working day.
      2. Regarding interest calculation it will be up to Jun -2017 only and interest rate will be that of FY 2017-2018

  • Will I get the same rate of interest if I contribute more than 12% as employee contribution to my EPF account?

    • Sir,
      Yes, the interest rate will be the same for the contribution made over and above 12%.

  • i have worked in 3 organizations
    Company A – 50000 PF balance for duration of (2013-2015)
    Company B – 35000 PF balance for duration of (2015-2017)
    Company C – PF Not Available for duration of (2017-2018)

    i just joined the company with PF component so can you please brief how interest calculation will be done ?

    thanks in advance.

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