EPF Interest Rate 2025: How to Calculate the Interest Rate of EPF Contribution

The EPF interest rate for FY 2024-25 is 8.25% per annum, and is applicable on all contributions made between April 1st, 2024, and March 31st, 2025. EPF interest is calculated monthly on the closing balance, but is credited annually. EPF interest earned is tax-free. However, the interest earned on employee contributions exceeding Rs. 2.5 lakh in a financial year is taxable. For government employees, this threshold limit is Rs. 5 lakh.

Current and Historical EPF Interest Rates

EPF Interest Rate FY 2024-2025

The EPF Interest Rate for FY 2024-25 is fixed at 8.25%. 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. Thus, the total interest for the year will be credited at the end of the financial year. For an interest rate of 8.25%, the monthly interest calculation will be considered as 0.688%, i.e., 8.25% divided by 12 months.

EPF Interest Calculation 2025

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, up to a maximum of Rs 1,250 per month, 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. 50,000): Rs. 6,000.
• Employer contribution to EPS (8.33% of Rs. 15,000): Rs. 1,250.
• Employer contribution to EPF (6,000 - 1,250): Rs. 4,750.

The total EPF contribution for a month will be ( Rs. 6,000 + Rs. 4750): Rs. 10,750.

Total EPF contribution in the above case for the first month of joining the service = Rs. 10,750.

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. 10,750 

EPF contribution in the 2nd month = Rs. 10,750

Total amount accumulated in the 2nd month of service = Rs. 21,500 (Rs. 10,750 + Rs. 10,750)

Interest accrued on the EPF contribution in the 2nd month = Rs. 21,500 * 0.688% = Rs.147.92

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. 

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

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 Indian Income Tax Act, 1961.

What Happens If EPF Contribution Is Not Paid?

An EPF account becomes inoperative or dormant if EPF contributions are not made into an EPF account for a continuous 36 months. EPF interest will be credited to the employees' accounts until they become inoperative or dormant. However, interest will not be credited to the inactive EPF accounts. 

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