EPF: How To Calculate Your Provident Fund (PF) Interest Rate

Employee Provident Fund is a savings scheme of Government of India which was introduced by the EPF and Miscellaneous Act, 1952. It’s objective is to secure the post-retirement financial stability of the salaried employees working in various organizations all over India. It is regulated by the central board of trustees and the government, together with the help of EPFO (Employees Provident Fund Organization).

How can we receive the benefit of EPF?

Let us first see how this scheme works. Each employee has to open a provident fund account when he joins a company or organization from his nearest post office or through the official website of EPFO. On opening the provident fund account, a person will receive an UAN-universal account number, which he/she has to share with his employer. The UAN Portal can also be used to access the account online to check the balance in the PF account.

The employee has to contribute a minimum of 12% of his basic salary plus any DA- dearness allowance he receives from his company each month. Along with this contribution, the employer will also contribute 12% of his basic salary into the PF scheme. However, this contribution is distributed between two parts, of which one part i.e., 8.33% is contributed to EPS- Employees’ Pension Scheme and the remaining 3.66% into EPF account.

The total accumulated fund in your PF account, as well as the interest you gain on this deposited fund, is tax-free. It is a wise decision to invest in Employees’ Provident Fund as your post-retirement fund because it guarantees you stable earnings post-retirement or if you suddenly stopped working due to some reason.

However, it provides a one-time lump-sum payment that can be availed upon retirement or once you leave your job with a particular employer.  For the regular monthly income, you can invest in something like a Bajaj Finance Fixed Deposit, which guarantees high returns and also allows you to receive the accumulated interest periodically.

How to calculate your provident fund interest rate?

Before understanding how to calculate PF amount, you must remember that it is a government regulated scheme. Therefore, the interest rate is decided by the government in consultation with the central board of trustees for each financial year (April-March). The annual interest rate for 2018-19 was 8.65% which remained constant for a while.

The interest you receive is calculated on a monthly basis. Suppose, the annual interest rate for EPF is 8.50%, then it will be divided by 12 and fixed at 0.70833% for each contributing month of your EPF. This amount of interest earnings will be added to the contribution of funds for that month and carried forward as opening balance for the next month and so on.

For example, 12% of your basic salary that you contribute towards EPF is 10,000 and your employer also contributes the same amount then,

12% of 10,000 + 12% of 10,000 = 1200+1200

i.e. 2400 is the contribution towards EPF

And 0.70833% of 2400 = 17

Hence, 2400+17 = 2417 will be your opening balance for the next month.

You can easily check your balance anytime online on the website of EPF India or by using the “UMAANG” App.

Fixed Deposits– A powerful investment alternative

There are various investment instruments available in the market other than the EPF that can provide you stable and high returns.

One such instrument is a fixed deposit. Fixed deposits guarantee high returns which are safe even in volatile market conditions. The high ratings received by corporate FDs such as Bajaj Finance FDs (rated FAAA/stable by CRISIL and MAAA/stable by ICRA) speak volumes about its credibility in the market.

Moreover, Bajaj Finance also helps you to calculate the interest rate of your FD through an online FD calculator. Using this tool, you can calculate the returns and FD interest rates based on the tenor and amount of your fixed deposit. Also, you can always check your accumulated earnings through the online FD account. This is much simpler than tracking your PF investments across different employers.

Bajaj Finance fixed deposits offer flexibility to choose tenor between12 and 60 months, thereby making it easy to ladder multiple investments in accordance with various financial goals.

The current interest rates offered by Bajaj Finance FD are up to 8.95%, which makes it one of the paying fixed deposits in India. Also, you can earn positive returns with short-tenor FD even when inflation is at its peak. EPF doesn’t offer this benefit. Therefore, fixed deposits are a secure and high return investment option for those who are looking to enjoy financial stability post-retirement.

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