How to calculate your PF amount at retirement?

Will you receive the interest if your employer pays the contribution late? 

How much interest will you get if you make a partial withdrawal? PF is paid on employee share or the employer’s share? 

These are some questions about the PF interest that most of us don’t know much about  

PF Interest Rules

The PF interest rates are decided by the PF board. However, the PF department does not have the final say in this. Once decided by them, the proposal is then forwarded to the Finance Ministry for approval after which the rate of interest is notified and credited to the accounts of PF members.

The interest is credited on a monthly running basis and is calculated only on the pF share deposited by the employee and the employer. The wage month for PF calculation is different from the financial year calculation as the interest is calculated from March to February unlike the FY which is calculated from April to March.

Interest In Inoperative Accounts

If there is no new contribution to the EPF account, then the account becomes inoperative but still continues to earn interest. However, the accretion to your PF balance after will be taxable in subscriber’s hands. Taxes may be paid by way of advance tax or self-assessment tax, as applicable. However, no interest is paid if – 

-the subscriber has passed away

– the subscriber has settled abroad permanently

– the subscriber has attained 55 years of age

– if no claim has been received for settlement for 36 months from the date when the amount became payable on cessation of employment 

Interest Calculation Formula

The interest is calculated on monthly basis as follows:

  1. On the closing balance of the amount
  2. On the sum withdrawn during the current year
  3. On the amount of contributions credited during the current year

Case Studies

Case 1

Full and Final withdrawal transferred the contribution before credit of interest in the passbook?

In such a case, interest is credited on the basis of the rate declared for the immediately preceding year. 

Incase the interest is not declared till then the interest is calculated as per the interest rates of the previous financial year and credited to the account.

If the withdrawal/transfer is done before 25th of the month then no interest is paid for the current month on the withdrawal.

Case 2

If the employer does not deposit or delays the contribution?

If the challan has been made by the employer but not paid by the employer then, no interest will be given.

If the challan payment is delayed and paid at a later date by the employer then, full interest will be credited from the date it was due.

How is interest calculated?

Let’s understand the PF calculation with the help of an example-


Employees basic salary + dearness allowance = Rs 14,000

Employees contribution towards the EPF = 12% * 14,000 = Rs 1,680

Employers contribution towards the EPF = 3.67% * 14,000 = Rs 514

Employers contribution towards EPS = 8.33% * 14,000 = Rs 1,166.

The total contribution that is made by the employer and employee towards the EPF account of the employee = Rs 1,680 + Rs 514 = Rs 2,194.

You have the interest rate at 8.5% for FY 2020-21.

You can calculate the interest rate which is applicable for each month as:

8.5%/12 = 0.70833%

Assume the employee joined the Firm XYZ in April 2019. The total EPF contribution for April will be Rs 2,194. The EPF scheme will not pay any interest for April.

The total EPF contribution for the month of May = Rs 4,388. (Rs 2,194+ Rs 2,194). He gets an interest of Rs 4,388 * 0.70833% = 31.08.

The calculation is done similarly for the subsequent months.

Is all this calculation too difficult for you?

No worries! Here is an EPF Calculator to help you calculate your PF amount at the time of retirement. 💰

Click here to know Why the pension amount withdrawal is less than you expected and how can you get the balance from the EPF Department? 

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