EPFO Retained the EPF Interest Rate at 8.25%: Here’s How to Calculate Interest on EPF Balance
Union Minister Mansukh Mandaviya chaired the 237th meeting of the Central Board of Trustees (CBT), EPF, on Friday. The Employees’ Provident Fund Organisation (EPFO) suggested the EPF interest rate at 8.25% for FY 2024-25. This rate is the same as the interest rate that was set for the previous financial year, 2023-24. EPFO has made no changes in this rate for this financial year. The interest rate will be officially notified by the Government of India.
The interest rate for EPF is usually announced in the last month of the financial year. However, it takes some time to credit the EPF interest amount. This is because the Finance Ministry has to agree to the proposal sent by the Labour Ministry before crediting interest in the accounts of EPF members.
How to calculate the interest amount of an EPF balance?
If you are unaware of how to calculate EPF interest, here is how you can calculate it. It will also help you to cross-verify the interest amount that you will receive in your EPF account.
According to the EPF scheme, the employee contributes 12% of his basic wages to the scheme. The employer also contributes 12% of the employee’s basic wages in the EPF scheme. But the employer’s contribution is further divided into two parts. Out of the 12% contribution, 8.67 goes to the Employees Pension Scheme (EPS) with a limit of Rs.1,250 per month and the balance is credited to the EPF account of the employee.
Let’s assume that the balance in the EPF account as of April 1, 2024, is Rs.2,00,000. The basic salary is Rs. 40,000 per month for the financial year 2024-25.
Calculation of Total Monthly EPF Contribution by Employee and Employer
(A) Monthly basic salary: Rs.40,000
(B) Employer’s EPF contribution: Rs.4,800 (40,000 X 12%)
(C) Employer’s Contribution in EPF: Rs.3,550
(D) Employer’s Contribution in EPS: Rs.1,250
(E) Total EPF contribution (B+C+D): Rs.8350
Therefore, Rs.8350 would be deposited monthly in the employee’s EPF account.
Therefore, the total interest of Rs. 20,977.69 will be credited to the EPF account of the employer. This will be added to the opening balance of Rs 2,00,000 in April 2024.
Other Highlights from the Meeting
In the 237th CBT meeting, the EPFO announced a few initiatives:
1. The Employees’ Deposit Linked Insurance (EDLI) scheme has been modified for family members where an EPF member dies. If the EPF member dies within six months of their last EPF contribution received. However, it is only possible if the EPF member’s name is not removed from the company’s record.
2. If the EPF member passes away without completing one year of continuous service, the family members will still receive a minimum life insurance benefit of Rs.50,000.
3. A gap of two months between jobs will still be considered as continuous service. The employee is still eligible for higher EDLI benefits.
