The Employees Provident Fund Organisation (EPFO) has recommended an 8.25% interest rate for the financial year 2024-25. This is the same interest rate announced for the previous financial year, FY 2023-24.
According to a PIB press release dated February 28, 2025, “The Central Board of Trustees of EPFO recommended 8.25% annual rate of interest to be credited on EPF accumulations in members’ accounts for the financial year 2024-25. The interest rate would be officially notified by the Government of India, following which EPFO would credit the rate of interest into the subscribers’ accounts.”
However, few individuals are aware of how EPF interest is calculated. Here is how EPF members can calculate the interest they earn on their monthly EPF deposits or contributions. This will help them cross-check the interest that will be credited to their EPF account in the future.
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How EPF interest is calculated
According to para 60 of the EPF Scheme, 1952, interest is calculated on the monthly running balance, even though the interest is credited at the end of the financial year. This is similar to how PPF interest is calculated and credited to PPF accounts of PPF subscribers.Generally, the announcement of the interest rate for the EPF happens in the last month of the financial year for which the interest rate is applicable. However, the credit of EPF interest takes time. This is because the proposal is sent by the Labour Ministry to the Finance Ministry. The Finance Ministry has to agree and notify the same. Once it is notified, the process of crediting interest in accounts of EPF members starts.
Calculation of interest on EPF deposits with example
Here is an example of how to calculate interest on EPF deposits. Suppose the balance in the EPF account as of April 1, 2024, is Rs 2 lakh. The basic salary is Rs 40,000 per month for the FY 2024-25. According to EPF scheme rules, 12% of employees’ basic wages goes into the EPF account. The employer is also required to make matching contributions. However, out of the employer’s 12% contribution, 8.67% goes to the Employees Pension Scheme (EPS) account with a limit of Rs 1,250 per month. The balance is credited to the EPF account.
| Monthly basic | Rs 40,000 |
| Employee’s EPF contribution (40,000X12%) | Rs 4,800 |
| Employer’s EPF contribution | Rs 3,550 |
| Employer’s EPS contribution | Rs 1,250 |
| Total EPF contribution (Employee + Employer) | Rs 8,350 |
Hence, in FY 2024-25, Rs 8,350 would have been deposited monthly into the employee’s EPF account.
| Month | EPF deposit (In Rs) | EPF deposits for interest calculation (In Rs) | Monthly interest (In Rs) |
| Apr-24 | 8350 | 208350 | 1432.41 |
| May-24 | 8350 | 216700 | 1489.81 |
| Jun-24 | 8350 | 225050 | 1547.22 |
| Jul-24 | 8350 | 233400 | 1604.63 |
| Aug-24 | 8350 | 241750 | 1662.03 |
| Sep-24 | 8350 | 250100 | 1719.44 |
| Oct-24 | 8350 | 258450 | 1776.84 |
| Nov-24 | 8350 | 266800 | 1834.25 |
| Dec-24 | 8350 | 275150 | 1891.66 |
| Jan-25 | 8350 | 283500 | 1949.06 |
| Feb-25 | 8350 | 291850 | 2006.47 |
| Mar-25 | 8350 | 300200 | 2063.88 |
| Total EPF interest in FY 2024-25 | 20977.69 | ||
From the example above, the total interest of Rs 20,977.69 will be credited to the EPF account. This interest will be added to the opening balance of Rs 2 lakh. From the next financial year, the interest amount calculated per month will change as the opening balance has changed. The interest amount will also change if the interest rate for the next financial year changes. Further, the monthly EPF deposit will also change if the employee’s basic salary is revised due to appraisal or any other reason.
Other initiatives announced by the EPFO
In the 237th CBT meeting, the provident fund organisation announced certain measures as well. These are as follows:
1. Family members of an employee will get a minimum life insurance benefit of Rs 50,000 where an EPF member dies without completing one year of continuous service.
2. The Employees’ Deposit Linked Insuance (EDLI) facility has been extended to family members where an EPF member dies within six months of their last contribution received. The EDLI benefit will be admissible, provided the EPF member’s name is not stuck off from rolls.
3. The EPFO has eased the service requirement for the EDLI benefit. As per the announcement, a gap of up to two months between two spells of employment will now be considered as continuous service, ensuring eligibility for higher quantum EDLI benefits.
