EPF stability: How to calculate Employees’ Provident Fund stability and curiosity?

The Central Board of Trustees of Employees’ Provident Fund Organisation (EPFO) has really helpful an 8.50% annual fee of curiosity to be credited for EPF subscribers accounts for the monetary yr 2020-21. Methods for the calculation of EPF rates of interest The EPFO decides the speed of curiosity for the EPF scheme on a yearly foundation. The fee of curiosity relies available on the market situations and is vetted by the finance ministry. The rate of interest might be calculated both through the use of the step methodology or the method methodology. The fee of curiosity for the FY 2020-2021 is 8.5%. Also Read | Australia’s prime time battle towards large tech For instance, we assume, EPF Basic wage and dearness allowance to be ₹15,000 and with a present fee of curiosity of 8.5% Example of calculation of curiosity for a monetary year- Basic Salary + Dearness Allowance = ₹ 15,000 Employee’s contribution in the direction of EPF = 12% of ₹ 15,000 = ₹ 1,800 Employer’s contribution in the direction of EPS = 8.33% of ₹ 15,000 = ₹ 1,250 Employer’s contribution in the direction of EPF = Employee’s contribution – Employer’s contribution in the direction of EPS = ₹ 550 Total EPF contribution each month = ₹ 1,800 + ₹ 550 = ₹ 2,350 The rate of interest for 2019-2020 is 8.50%. When calculating curiosity, the curiosity relevant per thirty days is = 8.50%/12 = 0.7083% Total EPF Contribution for the primary month = ₹ 2,350 Interest on the EPF contribution for April = Nil (No curiosity for the primary month) EPF account stability on the finish of April = ₹ 2,350 Total EPF Contribution for May = ₹ 2,350 Total EPF contribution for May = ₹ 4,700 Interest on the EPF contribution for May = ₹ 4,700 * 0.7083% = ₹33.29 Interest fee on Inoperative EPF accounts As per the regulation, a provident fund (PF) account turns into inoperative within the case the place an worker retires from service after attaining the age of 55 years or migrates overseas completely or dies and an utility for withdrawal of his accrued stability will not be made inside 36 months. Until such time, the curiosity quantity will proceed to accrue on the PF corpus. In Budget 2021, the federal government had proposed to tax the curiosity earned on contributions revamped and above ₹2.5 lakh. Currently, curiosity earned on PF contributions is tax-free. Even the accrued PF stability is exempt from tax if an individual has rendered steady service for a interval of 5 years or extra. Subscribe to Mint Newsletters * Enter a legitimate e-mail * Thank you for subscribing to our publication.