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. Unlike Fixed Deposit where the interest rate is predefined and Interest is given Quarterly, Monthly, 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 was calculated as the previous balance is zero
  • Interest doesn’t get calculated every month, once the Interest rate is announced, it’s calculated and added to the Year End Balance
  • In this case, the year end Balance is 18804 and the Interest accrued from Apr 2017 to Mar 2018 is 736
  • So the Total Balance as of March 31, 2018, would be = 18804+736 = 19504

Shan

Shan is an expert on on Employees Provident Fund, Personal Finance, Law and Travel. He has over 8+ years of experience in writing about Personal Finance and anything that resonates with  ordinary citizens. His posts are backed by extensive research on the topics backed by solid proofs

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