Employee Provident Fund (EPF) is a retirement benefits scheme framed under the Employees Provident Fund & Miscellaneous Provisions Act, 1952. The scheme applies to those who are employed. As per the EPF scheme, the employer deducts a certain amount of contribution from the employee’s salary and deposits in his or her EPF account. An employer also contributes to the employee’s EPF account.

On retirement, the employee receives a lump sum corpus of EPF, including the employee’s contribution, employer’s contribution and the interest amount credited every year. The government reviews the interest rate on EPF accounts regularly. For the FY 2024-25, the interest rate notified is 8.25% which is similar to that of FY24.

EPF Interest Rate 2025

The EPF Interest Rate for 2025 is fixed at 8.25% same as FY24. This rate is valid for all EPF contributions made from 1st April 2024 to 31st March 2025.  

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. Interest for the FY 2024-25 is 8.25%. Hence, for monthly interest calculation, the interest rate will be considered as 0.688%, i.e. 8.25% divided by 12 months.

What Happens If EPF 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. 

EPF Contribution Limit

Both the employee and the employer can contribute to EPF but within the specified ceiling rates.

An employee can contribute an amount equivalent to 12% of basic salary plus dearness allowance (DA) to the EPF account. However, if the entity has less than 20 employees or is a designated industry such as Brick, Beedi, Jute etc. then the contribution will be up to 10% (instead of 12% of basic salary plus DA).  

The employer also contributes a similar amount i.e., 12% of basic salary plus DA of the employee. However, 8.33% of it goes towards EPS - Employee Pension Scheme (EPS) subject to a ceiling limit of Rs. 1,250 per month if the salary of the employee is Rs. 15,000 or more. The rest 3.67% is contributed to the employee's EPF account.

The employee and the employer have the option to contribute more than the statutory 12% to the EPF account. However, the exemption will be provided only up to 12% and the excess contribution will be taxed. 

How to Calculate EPF Interest Rate?

The following details are required to calculate EPF interest: 

• The current age of an employee.
• Current EPF balance.
• Monthly basic and dearness allowance of up to a maximum of Rs.15,000.
• Percentage of contribution to EPF.
• Retirement age.

Calculation of EPF Interest

The employee’s contribution is 12% of basic salary + dearness allowance, while the employer’s 12% contribution is divided into two parts - 8.33% towards EPS account upto 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 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 
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. 

Also, the closing balance of the EPF account in the first year will be the opening balance for the second year. The EPF interest for the second year will be calculated, including the opening balance carried forward from the previous year.

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

EPF Interest Rates for the Last 15 Years

Taxation on EPF Interest

An 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 accumulated for above Rs. 2.5 lakh contributions is also subject to TDS. However, the interest accumulated on EPF contibutions within Rs. 2.5 lakh are tax-free. The interest collected on dormant accounts is taxable in the hands of the member.

Employees can claim tax deductions on EPF contributions up to Rs. 1.5 lakh under Section 80C of the Indian Income Tax Act, 1961. In addition, there will be no tax deduction on EPF partial withdrawal when the PF funds are withdrawn after 5 years of continuous contribution to the account. 

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