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 (0.688% per month), applicable to all contributions made during the financial year 2025-26 in the Employees Provident Fund Organisation. EPF interest is calculated monthly on the closing balance of the EPF account, and is generally tax-free.

Key Highlights:

• Higher interest rate (8.25% p.a.) and significant tax benefits make PF an attractive investment option, as compared to fixed deposits.
• Interest earned on employee contributions exceeding Rs. 2.5 lakh in a financial year is taxable. 
• 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.

Therefore, when you check the PF balance at any time during the financial year, and see the interest not credited to your account, it should not be seen as a sign of error. The accumulated interest will be credited on 31st March of the financial year. 

This infers the most appropriate time to check PF balance, including both contribution and interest, is the end of the financial year, or the very beginning of the next financial year.

EPF Interest Calculator

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

EPF v/s Conventional Low-Risk Investment Options

As already mentioned, EPF is one of the most attractive low-risk investment options. It offers a competitive interest rate of 8.25%, which is significantly higher than conventional low-risk investment options like FDs, RDs, and even some debt instruments. The following table compares the return on investments, EPF v/s other options.

EPF Interest Calculation 2026

EPF interest cannot be calculated on the entire monthly contributions. When your employer contributes to PF account, only 3.67% is credited to the PF account. The remaining 8.33% (of 12%) gets credited to your EPS account. And EPS does not provide you any interest. 

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.

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

Interest amount for the contribution = ₹25.

Important note: PF interest is calculated on monthly running balance basis. The balance as per the beginning of the month is considered for interest calculation. Therefore, the contribution made during the month will be considered for interest calculation for next month. 

In the current example, the contribution made is for the first month of service, but the interest for the same is calculated only on the next month, not at the end of the first month.

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.

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.