How interest rate is calculated on EPF scheme?

Ever wondered how interest on your EPF savings is calculated? It is neither like Fixed Interest or Compound Interest.It’s completely different way it’s calculated.

Interest Rate & Interest Payout

Unlike Fixed Deposit where interest rate is predefined and Interest is given Quarterly,Monthly or Yearly, here interest rate fluctuates from year to year as shown EPF Interest rate over the years

 

 

Let us say how PF is calculated for a person with a Basic Salary of 10,000 for the year 2017-18

  • PF Interest rate was 8.55% for 2017-18
  • At end of the April 2017 , no interest gets calculated as the previous balance is zero
  • Interest doesn’t get calculated every month, once Interest rate is announced, it’s calculated and added to the Year End Balance
  • In this case Year End Balance isĀ 18804 and Interest accrued from Apr 2017 to Mar 2018 is 736
  • So the Total Balance as on March 31,2018 would be = 18804+736 = 19504
Month - YearBasic SalaryEmployee Contribution (12%)Employer Contribution (3.67%) Balance at the
End of the month
Interest accrued
Apr201710000120036715670
May2017100001200367313411
Jun2017100001200367470122
Jul2017100001200367626833
Aug2017100001200367783545
Sep2017100001200367940256
Oct20171000012003671096967
Nov20171000012003671253678
Dec20171000012003671410389
Jan201810000120036715670100
Feb201810000120036717237112
Mar201810000120036718804123
Balance (Balance in Mar2018+Interest accrued)18804+73619540
Apr201818804120036720371

 

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