EPF Calculation 2023: Provident Fund Account money is very important for employed people. However, many people withdraw it when they leave or change jobs. Long term investments can create a huge corpus. Provident Fund Account is a good retirement savings option for people working in the private sector. EPFO manages the accounts of crores of account holders. In these accounts, the basic salary and dearness allowance of both the employee and the employer are deposited in 24 per cent (12+12) share. The government fixes the interest every year on the amount deposited in this EPF account.
EPF Calculation 2023
EPF Calculation 2023
At present the interest is 8.5 per cent. This creates a huge corpus for retirement. Also the magic of compound interest is such that you can become a millionaire with 25 years of investment.
No interest is earned on the entire amountEPF Calculation Big News,
How is EPF Crorepati Calculator (EPF Calculation) done? Account holders generally assume that interest is earned on the entire money deposited in the Provident Fund. But, this does not happen. Interest is not calculated on the amount going to the pension fund in the PF account. In every month’s salary slip, you can see how much is your basic salary and DA. 12 percent of the basic salary + DA of each employee goes to the EPF account. The company also contributes 12 per cent of the basic pay + DA. Interest is earned on the money collected by combining both the funds. The interest is reviewed every year, but the advantage is that due to compound interest, the interest also doubles.
Retirement fund will be Rs 1.48 crore on 10 thousand basicEPF Calculation Big News,
- EPF member age 25 years
- retirement age 58 years
- Basic Pay 10,000
- Interest rate 8.65%
- Increment 10% (annual)
- Total Fund Rs 1.48 Crore
15,000 Retirement Fund on Basic Pay
- EPF member age 25 years
- retirement age 58 years
- Basic Pay Rs 15000
- Interest rate 8.65%
- Increment 10% (annual)
- Total Fund Rs 2.32 Crore
This is how interest is calculated on EPF
The interest is calculated (EPF Crorepati Calculator) on the basis of the money deposited in the PF account every month i.e. monthly running balance. But, it is deposited at the end of the year. According to the rule of EPFO, if any amount is withdrawn in one year from the outstanding amount on the last date of the current financial year, then interest of 12 months is deducted on it. EPFO always takes the opening and closing balance of the account. To calculate this, the monthly running balance is added and multiplied by the interest rate / 1200.
loss of interest on withdrawing money
If any amount is withdrawn during the current financial year, then EPF interest is calculated from the beginning of the year till the month immediately preceding the withdrawal. The closing balance (PF Balance) of the year will be its opening balance + contribution-withdrawal (if any) + interest.
think of it as
- Basic Pay + Dearness Allowance (DA) = ₹30,000
- Employee contribution EPF = 12% of ₹30,000 = ₹3,600
- Employer contribution EPS (subject to the limit of ₹1,250) = ₹1,250
- Employer contribution EPF = (₹3,600-₹1,250) = ₹2,350
- Total monthly EPF contribution = ₹3,600 + ₹2350 = ₹5,950
Contribution to Provident Fund as on 1st April 2020
- Total EPF contribution in April = ₹ 5,950
- Interest on EPF in April = Nil (No interest in first month)
- EPF account balance at the end of April = ₹ 5,950
- EPF contribution in May = ₹5,950
- EPF account balance at the end of May = ₹ 11,900
- Monthly interest calculation = 8.50% / 12 = 0.007083% Interest calculation on EPF for May = ₹ 11,900 * 0.007083% = ₹ 84.29
EPFO EPF Interest Formula
The interest rate for any financial year is notified by the government. Interest is calculated at the end of the current financial year (EPF Interest). By adding the remaining amount on the last date of each month of the year, the amount of interest is calculated by dividing the fixed interest rate on that amount by 1200.
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