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.
Latest PF interest rate [2021-22]
EPFO sets interest rate at 8.1% for 2021-22, lowest in over one decade
Latest fiscal, EPFO had given 8.5% interest rate.
The Employees’ Provident Fund Organisation (EPFO) on Saturday decided to pay 8.1 percent rate of interest on provident fund deposits for the current financial year 2021-22.
This is lowest in over one decade and likely to disappoint over 60 million of its salaried class subscribers.
Current PF interest rate [Feb 2021-22 update]
The Employees’ Provident Fund Organisation (EPFO) has declared that interest will be applicable at the rate of 8.1% for FY 2021-22. That will affect more than 60 million PF members, who will be getting a lower percent interest than the previous year when it was 8.5% (FY 2019-2020 to 2020-2021). This is also the lowest rate of interest over the last 10 years.
Change In PF Interest Rates Over Years
The PF interest rates keep changing every year. In the below graph, you can see the EPF rate history over one decade.
The latest financial year, FY 2021-22, is the lowest since FY 2012-13, when it was 8.1%.
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.
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.
|EMPLOYEE CONTRIBUTION(12%)||EMPLOYER CONTRIBUTION(3.67%)||BALANCE AT THE END OF THE MONTH||
|1440||440.4||1880.4||Nil Just joined|
(Total EPF at the end of the year)
So, the total interest Siddharth had received for his EPF contributions from June to March is Rs.456.97.
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.
Details required for PF calculation
If an employee wants to calculate PF, then they require the following details –
- Current PF balance as opening balance
- Monthly EPF contribution
- Rate of PF interest
Through all these details, you can calculate your PF amount to reveal the total interest that you would receive at the time of retirement. We hope you found it helpful.
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.
If you have any doubts or queries kindly drop them in the comment section below.