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How Is EPF Calculated with Formula | Employee Contribution to EPF

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Employers Provident Fund (EPF) is an option for saving money for retirement specifically designed for long-term planning. Any company with at least 20 employees can be provided with the option of deducting EPF from their payroll.

In the case of EPF employees, they contribute 12% of their base salary. Employers contribute 8.33% to the employees’ Retirement Scheme and 3.67% to the employees’ EPF.

The sum of the employer and employer contributions is deposited into a fund established with the Employee Provident Fund Organisation. A PF percentage on the salary of the interest earned determined by the monthly operating balance is paid and is added to the account at the close of the fiscal year.

EPF deduction is compulsory for employees with less than ₹15,000. However, other employees can opt out of the scheme by an application on Form 11 of the EPFO.

Did You Know?

Calculating EPF can be somewhat daunting for a few people. So, special EPF calculators are used so that one can calculate his/her EPF in no time. Rather than applying the formula manually, you can just enter the necessary data in such EPF calculators and enjoy quick and accurate answers.

How Is EPF Calculated?

If you’re wondering about how to calculate PF on salary or how PF calculation on salary is implemented, then here’s your answer, salary-paying employees contribute a set amount each month to the Employee Provident Fund. A matching contribution is paid through the company. The minimum contribution per month is 12% of basic pay. However, a contribution of as high as 100% of the salary base can be contributed by the employee.

Employers are not required to match contributions made by voluntary employees and may limit the contribution to 12%. When you add the employee’s and the employer’s contributions in combination, the interest earned is added to the PF account of the employee.

It is specified by the government every financial year. For FY 2021-22, it is reported that the EPF Interest Rate is 8.1%. The rules governing the calculation of interest rates on Contributions to the Provident Fund are set out in para 60 in the Employees’ Provident Fund Scheme 1952.

In EPF, the interest earned is paid to the running balance of the month. Three aspects are essential in calculating the interest amount of PF opening balance, contributions throughout the year and any withdrawals during the year.

Interest accrued over 12-months will be paid according to the balance amount as on the previous year’s date, plus any money withdrawn in the year.

In the case of PF contributions credited throughout this year’s fiscal year, interest earned from the beginning of the month that follows in the credit month up to the date of the final day of the current year will be credited to the PF account.

Also Read: Employees’ Provident Fund Organisation – EPFO Login Portal & EPFO Latest News

Provident Fund Calculation Formula

The month-wise closing balance is determined when an interest rate is notified of the Financial Year, and the year in progress ends at the month’s end. The annual interest can be calculated simply by adding up the running balance for the month and then multiplying it by the interest rate ÷ 1200.

If the interest rate is 8.65%, the amount of interest equals ₹1,04,740* 8.65/₹1200.

The balance at the end of each year would be Opening balance contributions – withdrawal plus interest

= ₹112345 + ₹1200 – ₹25000 + ₹7963 = ₹96508

In case a participant makes the final settlement, the interest calculation is added to the settlement amount. 

Steps to Calculate the EPF Amount at Retirement

To determine the total amount that one can expect to receive in retirement, people must adhere to the following steps to figure out the amount they will receive at retirement.

  • Step 1: Enter your date of birth and retirement to a maximum of 58 years in the appropriate box.
  • Step 2: Input your basic monthly pay and the expected annual increase in your basic salary in India.
  • Step 3: Provide the amount of the employee’s contribution and the employer’s contribution.
  • Step 4: Offer the interest rates (decided by the federal government) earned upon EPF balance.

The EPF calculation formula completes the computation process and displays the final result using this information.

Also Read: EPF Form 31 – How Does it Work? Application Process Explained

Employee Contribution to EPF

The employee pays 12% of their base salary and the Dearness Allowance each month into the EPF account.

For instance, if the base salary is ₹20000 per month, then the employee contribution is 12% of ₹20,000, which amounts to ₹2400. This is the amount that employees contribute.

Employer Contribution to EPF

Of the 12%, employers need to legally contribute 8.33% of EPF to the EPS (Employee Pension Scheme). The remaining 3 .67%must be paid towards the EPF. Thus 3.67% of ₹20,000 is ₹734.

So, the contribution to an EPF account each month for someone earning ₹20,000 in salary is the employee contribution plus the employer contribution, which is ₹2400 + ₹734 = ₹3134 in this instance.

If you feel this calculation is tricky, you can use a special EPF calculator. The next section covers the same.

How Does an EPF Calculator Work?

EPF calculator uses an exclusive algorithm to calculate the correct amount every time an individual inputs the correct details about his or her each month’s EPF deposits. 

With this calculator, people can quickly calculate a lump-sum amount they’ll accumulate in their EPF account following retirement. This amount must include the employee’s contribution, employer’s, and interest payment. It provides you with the exact PF on basic salary calculations.

The EPF calculator comes with an option to enter formulas. Here, individuals have to enter specific information such as age, salary per month, their contributions to EPF and the dearness allowance.

You can also input the current amount. After you’ve added all the relevant information into the appropriate area, the calculator displays the approximate EPF money available upon retirement.

The accessibility of EPF calculators online makes the process more simple.  

Advantages of EPF Calculator

The advantages of this EPF calculator are many. The benefits are as below.

  • EPF calculator allows individuals to be aware of the accumulated funds at the end of their time in service.  
  • Members can efficiently plan investments in other areas. 
  • When people get a better understanding of how much they will earn from EPF funds, they can raise the percentage to achieve the desired amount upon retirement.   
  • People can make their retirement plans judiciously. They can also increase their contributions in case they want to retire earlier. 

With the right knowledge about EPF calculation, making certain decisions becomes very easy for the salaried person. The direct calculation may not seem easy to everybody. So, using the EPF calculator is a short and straightforward way.

Tax Benefits for EPF contributions

A worker can enjoy tax benefits when making contributions to PF accounts as per article 80C in the Indian Income Tax Act, 1961. The benefit is available by contributing up to ₹1 lac to a PF account. 

If you contribute to an account in the employee provident fund for five years, you’ll not be eligible for a tax deduction for the amount you contributed. However, if the time that you contribute to your EPF contribution is shorter than 5 years, and you take out your PF contribution before 5 years, you’ll need to pay the TDS.

Benefits of EPF

EPF provides a range of benefits available to employees. A small contribution from the employer and the employee can help the employee attain financial stability following retirement. It creates a sense of security for the future.

It’s a form of investment strategy that can be used by the employee and employer. The following are the benefits that accrue from Employee Provident Fund: Employee Provident Fund:-

  • Corpus for retirement
  • Premature withdrawal
  • Emergency Corpus
  • Tax saving


Keep in mind that EPF is a long-term instrument. If you’re looking to meet short-term financial goals, Don’t attempt to finance it by withdrawing funds from your EPF.

Suppose your goals are mostly short-term, which happens with young couples or parents funding their children’s education over the upcoming years.

You may think about investing only the minimum amount you can in your EPF and directing your remaining funds to an asset that is more liquid with your risk aversion and time horizon for your goal in your mind.

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