EPF Interest Rate 2026: How to Calculate the Interest Rate of EPF Contribution

The EPF interest rate for FY 2025-26 is 8.25% per annum, applicable to all contributions made between 1st April 2025 and 31st March 2026 in the Employees Provident Fund Organisation. EPF interest is calculated monthly on the closing balance of the EPF account but is credited annually at the end of the financial year. The interest earned is generally tax-free.

Key Highlights:

• Interest earned on employee contributions exceeding Rs. 2.5 lakh in a financial year is taxable. 
• Employees can also claim tax deductions up to ₹1.5 lakh under Section 80C for EPF contributions.
• The principal and interest are tax-free, making it is a popular retirement plan among the salaried class.

EPF Interest Rate FY 2025-2026

The EPF Interest Rate for FY 2025-26 is fixed at 8.25% (0.688% per month). The EPF interest is calculated monthly on the EPF contributions, but deposited into the EPF account only on 31st March of the applicable financial year.

Current and Historical EPF Interest Rates

The EPF interest rate is reviewed annually by EPFO’s Central Board of Trustees in consultation with the Ministry of Finance. The EPFO has fixed the EPF interest rate at 8.25% for FY 2025-26. The interest rates for the past years are listed below.

EPF Interest Calculator

To calculate your EPF fund after retirement, go to the EPF calculator.

EPF Interest Calculation 2026

Normally, the employee’s EPF contribution is 12% of basic salary + dearness allowance, while the employer’s EPF contribution of 12% is divided into two parts - 8.33% towards the EPS account, and the balance 3.67% is transferred to the EPF account. 

For example, if an employee’s basic salary + dearness allowance is Rs. 50,000: 

• Employee contribution to EPF (12% of Rs. 15,000): Rs. 1,800.
• Employer contribution to EPS (8.33% of Rs. 15,000): Rs. 1,250.
• Employer contribution to EPF (3.67% - Rs. 15,000): Rs. 550.

The total EPF contribution for a month will be ( Rs. 1,800 + Rs. 1,250+ Rs. 550): Rs. 3,600.

Total EPF contribution in the above case for the first month of joining the service = Rs. 3,600.

Interest Rate: 8.25% / 12 months = 0.688% per month

Interest on the EPF contribution for the 1st month = Nil 

EPF account balance at the end of the 1st month = Rs. 3,600

EPF contribution in the 2nd month = Rs. 3,600

Total amount accumulated in the 2nd month of service = Rs. 7,200 (Rs. 3,600 *2)

Interest accrued on the EPF contribution in the 2nd month = Rs. 7,200 * 0.688% = Rs.49.536

A similar calculation is done for all other months of the year.

The total EPF balance at the end of the year will be the sum of the employer contribution, employee contribution, and monthly interest accrued during the year. 

Taxation on EPF Interest

• Interest received on the employee’s contribution to the EPF account above Rs. 2.5 lakh in a financial year is taxable in the hands of the employee. The interest is also subject to TDS. 
• However, the interest accumulated on EPF contributions within Rs. 2.5 lakh is tax-free. 
• Employees can also claim tax deductions on EPF contributions up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Final Word

With tax benefits under Section 80C, EPF remains more rewarding than many traditional savings schemes. Employees should stay updated on EPF rates, understand taxation rules, and use an EPF calculator to plan their retirement corpus effectively.