Employee Provident fund EPF interest calculation
Employee Provident fund is a fund which is a very compulsory contribution of saving money or it can also be said that it is a fund created by central government. To this, both the employer and employees of the company make equal contribution monthly, which is beneficial to both of them. Please follow this link to download your epf passbook with all the transactions.
Here the provident fund scheme is supportive to the following needs of the employees of the company / factory:
- After retirement of the employee.
- Medical care.
- Education of children.
- Financing of insurance policies.
In India, provident fund is known as employee provident fund (E.P.F) and the organization which started practicing this provident fund system is known as Employees Provident Fund Organization (E.P.F.O). The administrator of (E.P.F.O) administrates a compulsory contributory provident scheme, pension scheme, and insurance scheme. The headquarters of employees provident fund organization is located at New Delhi.
On legal basis, in India “The employees’ provident fund and miscellaneous provision act 1952” came on the 4th march 1952. There are three schemes which are taken in operation under this Act are as follows:-
- Employees provident fund scheme, 1952.
- Employees deposit linked insurance scheme, 1976.
- Employees pension scheme, 1995 (replacing the employees’ family pension scheme, 1971).
This act is applicable under the following conditions which are as follows:
- The factory / industry / company having more than 20 employees.
- Or any other type of establishment with more than 20 members / employees.
- Other establishment according to the central government notification.
Contribution of both, the employee and the employer is as follows:
- The employee of the company contributes 12 % from his monthly salary.
- The employer also contributes 12 % for the provident fund for each employee of his company.
Provident fund calculation is given as shown below:
EPF = [employee 12% from salary + DA] + [employer 12% + DA]
Where; DA is Dearness allowance
The main aim of this scheme is to extend the reach and quality of the old-age income security schemes through improving the standards of delivering benefits which gains the confidence and honesty, on making contribution to the economic and social well being of the employees of the company through this program.
Provident Fund Interest:
Every year, the provident fund interest rate goes on changing; in previous years (2011 – 2012) employees provident fund organization provided 8.25 % of interest rate to their subscribers. And last year (2012 – 2013) employees provident fund organization provided 8.5 % interest rate to its subscribers, which was greater than the interest rate of (2011 – 2012) year. According to the sources the provident fund deposit for 2013 – 2014 will stop at 8.7 %. Please follow this link to check your EPF Balance Online
Provident fund (P.F) for employees of the company;
PF employee contribution = 12 %
PF employer contribution = 12 %
Employer pension scheme:
Out of 12 % from employer, 8.33 % of contribution (or 541 Rs./month) which is a fixed amount is invested in employer pension scheme.
Suppose; your basic salary / month = 10,000 Rs.
Your contribution / month = 12 %, which is equal to 1200 Rs.
Employer contribution / month = 12 % i.e. 1200 Rs.
Employers pension scheme (EPS) = 8.33 % of 10,000 is equal to 833 Rs.
Thus 833 is greater than max. Limit of Rs. 541 / month.
Therefore, employers contribution to EPS = 541 Rs.
Employer contribution to PF = 1200-541 = 659 Rs.
Hence; your total PF contribution per month = 1200 + 659
Interest rate on provident fund account = fixed by central government is 8.5 %
So; the monthly contribution of 1859 Rs. for one year (2011-2012) @ 8.5 %
Please follow this link to understand the online epf claim process .