8.

65%
8.65% interest on EPF to be notified soon: Labour Minister

The Interest rate of EPF is reviewed every year after

consultation with the Ministry of Finance by EPFO’s Central
Board of Trustees. The EPF interest rate of 2019 is fixed at
8.65% (same as last year). Provident fund Interest rates for
the last five years are mentioned below:

EPF Contribution by Employee and

Employer
Depending on the entity contributing towards EPF, there are
two components of the contribution namely – employee and
employer contribution. The employee contributes 12% of basic
salary plus dearness allowance (“DA”) towards its EPF
account. The employee has to contribute a lower contribution
of 10% in case the entity has less than 20 employees and or if
the entity is certain designated industries such as Jute, Beedi,
Brick, etc.
The employer contributes a similar amount to the scheme
(12% of employee’s basic salary plus DA). 8.33% of such
employer contribution goes towards Employee Pension
Scheme (“EPS”) subject to a ceiling of 1,250 per month if the
salary of the employee is 15,000 or more and rest 3.67% is
added to the EPF account of the employee. The employer also
contributes 0.50% towards Employees’ Deposit Linked
Insurance (“EDLI”) account of the employee.
Pertinent to note here, the employee can also voluntarily
contribute higher than the statutory requirement of 12% and is
called contribution towards Voluntary Provident Fund (“VPF”)
which is accounted for separately. The VPF also provides tax-
free interest however the employer is not required to
contribute anything to VPF if the employee chooses to opt for
it.
How to Calculate Interest on EPF
Every month pf interest rate is calculated but is deposited in
the account at the end of the financial year. The interest
calculation on the EPF of the employee is explained by the
given example.
Basic Salary + Dearness Allowance = ₹ 30,000
Employee’s contribution towards EPF = 12% of ₹ 30,000 = ₹
3,600
Employer’s contribution towards EPS (subject to limit of 1,250)
= ₹ 1,250
Employer’s contribution towards EPF = ( ₹ 3,600 – ₹ 1,250) = ₹
2,350
Total EPF contribution every month = ₹ 3,600 + ₹ 2350 = ₹
5,950
The employee provident fund interest rate for 2019-2020 is
8.65%.the interest applicable per month When calculating
interest, is = 8.65%/12 = 0.7083%. Again to remind,
the provident fund interest will be calculated at the end of
every month however the interest amount will only be credited
at the end of the financial year.
Assuming the employee joined service on 1 April 2019,
contributions start for the financial year 2019 – 2020 from April
2019 only.
Total EPF Contribution for April = ₹ 5,950
For April Interest on the EPF contribution= Nil (No interest for
the first month)
EPF account balance at the end of April = ₹ 5,950
EPF Contribution for May = ₹ 5,950
Total EPF account balance as at May = ₹ 11,900
Interest on the EPF contribution for May = ₹ 11,900 * 0.7083%
= ₹ 84.29
Important points and FAQ’s

 What are the Withdrawal permissions from EPF amount

including epf interest under the rule?

In normal circumstances, an employee can withdraw the
principal amount including the accrued interest upon
retirement. However, anyone over 54 years of age is permitted
to withdraw 90% of the accumulated balance. If an individual
is out of employment for 60 days or more, the employee is
entitled to withdraw the entire accumulated balance on that
date.

 What is Universal Account Number (UAN)

Unique UAN number is allocated to subscriber to the scheme
by EPFO. The UAN acts as an umbrella for multiple member IDs
issued by different organizations where the concerned
employee has worked. Upon allocation of UAN, the employee
is required to provide the same on joining the new organization
so that the new member ID can be mapped under the same
UAN. Such details are provided via Form 11.

 Can you avail advances against your EPF balance

The contribution to the scheme is meant to take care of the
post-retirement needs however one does not have to wait until
retirement to avail financial assistance to meet certain
obligations. These advances are allowed only upon certain
situations like buying a house, repaying a home loan,
education or marriage of children etc. Unlike a loan, it is not
necessary to repay the advances availed.

 What are the Income-tax exemptions on EPF?

Contribution, interest accrued and withdrawals are exempt
from the income tax (EEE model). Contribution up to 150,000 is
admissible for deduction under Sec 80C of the Income Tax
Act. 

 What are the Contribution limits to Voluntary Provident

Fund Scheme?
Entire, 100% of basic salary plus Dearness Allowance can be
contributed to VPF. The contribution to VPF is entitled to
deduction under section 80C of the Income Tax Act subject to
150,000 limits.

New Provident Fund rule: Both employer and the employee pay 12 per cent of basic
wages each towards contribution to EPF. Provident Fund rule change: The Supreme Court
ruled this week that employers must consider special allowances paid to the employees as a
part of the "basic wage" for deduction towards provident fund.Apr 13, 2019