EPF Interest Rate 2025: How to Calculate PF Interest Rate Online, Contribution Rate

EPF Interest Rate 2025: The Employees' Provident Fund (EPF) is a retirement savings scheme where both the employer and the employee contribute equally. The scheme is administered by the Employees' Provident Fund Organisation (EPFO). Its primary purpose is to create a financial corpus for employees to rely on during retirement. For the financial year 2025, the EPF interest rate has been set at 8.25%. Below is the detailed information regarding the EPF Interest Rate for 2025.

EPF Interest Rate 2025

In the Employees' Provident Fund (EPF) retirement benefit plan, employees are required to contribute 12% of their basic salary and dearness allowance each month. The employer also contributes an equal amount, with 8.33% directed towards the Employees' Pension Scheme (EPS) and 3.67% towards the EPF. The accumulated funds in the EPF account earn interest at a rate declared by the government annually. Employees can withdraw the entire corpus upon retirement, and under certain conditions, they may also access the funds during their service period.

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Features of EPF Interest Rate 2025

• The current EPF interest rate is set at 8.25%.
• While the interest is calculated on a monthly basis, it is only credited to the Employees' Provident Fund (EPF) account at the end of the financial year, on March 31.
• The interest earned during the year is added to the principal amount and forms part of the balance for the following year, starting from April.
• An EPF account becomes dormant if no contributions are made for 36 consecutive months.
• Workers with dormant accounts who have not yet reached retirement age can still earn interest on their EPF balance.
• For retired employees, their EPF accounts become inactive, and no further interest is accrued.
• The income tax applicable to the interest on dormant accounts is determined by the individual's tax slab rate.
• Employees do not receive interest on contributions made to the Employees' Pension Scheme (EPS). However, they will start receiving pension payments from the EPS once they reach the age of 58.

Employer and Employee Contributions to the EPF

Contribution of Employees:

The contribution to the Employee Provident Fund (EPF) is made by both the employer and the employee.

• Employee Contribution: The employee contributes 12% of their basic salary along with dearness allowance to the EPF.
• Employer Contribution: The employer also contributes an equal percentage (12%) to the EPF, which may vary depending on the industry and company size.

In cases where the company employs fewer than 20 employees, the employee’s contribution is reduced to 10% of the basic salary + dearness allowance. For certain industries such as jute, beedi, coir, brick, guar gum, and similar sectors, the employee’s contribution is 10% instead of 12%.

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Contribution of Employer

• The employer contributes 8.33% of the employee's salary towards the pension plan from the Provident Fund (PF) payment. Meanwhile, the Employee Provident Fund (EPF) account receives a contribution of 3.67%.
• Additionally, the employer is obligated to contribute 0.50% towards the Employees' Deposit Linked Insurance (EDLI) scheme.
• An administrative fee of at least 500 rupees is applicable. However, if no contribution is made for a particular month, the employer will incur a penalty of Rs. 75 for each such month.

EPF Interest Rate for Previous Years

Interest Rate on EPF for Inactive Accounts

An employee's provident fund (EPF) account becomes dormant or inactive after 36 months of no new contributions. This often happens when an employee fails to transfer their EPF account from their previous employer to their current one.

Since 2016, interest has continued to accrue on the balance of an inactive EPF account, at the prevailing interest rates. Currently, the interest rate on the EPF is 8.25% per annum.

However, once your EPF account becomes inactive or the scheme's tenure ends, you will no longer earn interest. This means that if you are 58 years old or older and haven't withdrawn your funds, you will stop earning interest on your EPF balance.

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EPF Interest Rate Calculation

The interest on your EPF (Employees' Provident Fund) balance is calculated monthly but credited to your account at the end of the financial year, which is March 31st. As of now, the annual interest rate for EPF is 8.15%. To calculate the monthly interest rate, you divide the annual interest rate by 12. So, 8.15% per annum divided by 12 gives a monthly interest rate of approximately 0.6792%. This is the interest you will earn on your EPF balance each month.

EPF Withdrawals

You can only withdraw the entire amount from your EPF once you reach the age of 58 or if you have been unemployed for more than two months. However, there are certain situations where you may be allowed to make withdrawals before reaching the age limit, such as:

• If you wish to use the funds to pay off a home loan or cover medical expenses.
• If you are planning to permanently move abroad or if you have been jobless for more than 60 days.

Benefits of Tax on EPF Contributions

Under Section 80C of the Income Tax Act of 1961, you can claim a deduction of up to Rs. 1.5 lakh for contributions made to your Employee Provident Fund (EPF) account. This provides tax relief on the amount you contribute towards your EPF. Additionally, if you withdraw the EPF amount after completing five years of continuous service, the withdrawal is tax-free. However, if you make an early withdrawal before the completion of the five-year period, the amount withdrawn will be subject to tax.