PF Interest Rates and How to Calculate PF

EPF is a compulsory scheme started by the central governments that require the participation of all individuals who are employed and their employer. An employee’s PF will have funds that are contributed by both the employee and the employer. 12% of an employee’s basic salary is taken towards his PF account balance. The employer’s contribution, however, may differ depending on the situation.

An employer with liable to pay the same amount towards the pf contribution as the employee if the Basic and DA allowance together is lesser than 15000. However in situations where the Basic and DA allowance is greater than 15000 the employer can make any of the below decisions:

  1. The employer may restrict your contribution and the company’s contribution to Rs.15,000 per annum
  2. The employer may contribute an equal amount to that of the employee’s own contribution
  3. An employer may restrict your share of EPS to 12% of the salary while keeping its own share of Rs.15,000.

Now that we have established the of how the PF amount is obtained, let us look at PF interest rates and how they are calculated. PF interest rates keep changing every year, for the year 2017 -2018 it was set at 8.55. Let’s assume the PF interest rates to be set as 8.55 let’s see in the below example how the interest on PF is calculated.


Month Employee Contribution (12% of basic) Employer Contribution (3.67%) Monthly PF balance Interest applicable
June 1200 367 1567 Nil. Just Joined.
July 1200 367 1567+1567 = 3134 1567*8.55%/12 = Rs.11
August 1200 367 3134+1567 = 4701 3134*8.55%/12 = Rs.22
Septembe 1200 367 4701+1567 = 6268 4701*8.55%/12 = Rs.34.27

Now that you have learned about PF interest rates and how to calculate PF interest, here are a few points to remember:


  1. The salary for the month of August will be paid in September and the EPF contribution for August will be shown in September and not in August.
  2. The interest amount received on EPF is rounded off to the nearest decimal
  3. In the event of a death of the employee, interest is payable on the PF amount till the month preceding the month in which the death occurred.


Knowing your Pf details, how to calculate interest and pf balance is important. Follow these steps to know the right amount of pf balance you have in your pf account.