Here's how 8.15% EPF can be beneficial if you earn a fixed salary

The Employees' Provident Fund Organisation (EPFO) has announced the interest rate for Employees' Provident Fund (EPF) accounts for the financial year 2022-2023, set at 8.15 per cent. This decision was conveyed via an official circular dated July 24, 2023.

The Ministry of Labour and Employment, Government of India, granted approval under para 60(1) of the Employees' Provident Fund Scheme, 1952, to credit an interest rate of 8.15 per cent to each member's EPF account for the year 2022-2023. The EPFO has directed concerned authorities to ensure the timely crediting of this interest to the members' accounts.

"I welcome the government’s decision to approve the interest rate of 8.15 per cent on the Employees Provident Fund for FY 2022-2023. This process reflects careful consideration of various financial factors and strikes a balance between providing competitive benefits to employees and prudent management of the budget," said Amit Gupta, MD, SAG Infotech.

"EPF is an important tool to protect the financial future of employees, agreed interest rates indicate a stable and reliable long-term savings strategy, although higher interest rates may be desirable for employees, macroeconomic issues and potential impact on government finances must be considered," Gupta added.

What is EPF?

The Employees' Provident Fund (EPF) is a widely known retirement savings fund, also known as the Provident Fund (PF). Both employers and employees contribute to the EPF account, and it is governed by The Employees' Provident Funds Act 1952. Employers with a minimum of 20 employees are required to have EPF accounts for their workers.

EPF calculator for retirement planning

For retirement planning, individuals can utilise the EPF calculator, an invaluable online tool. By entering details such as age, basic monthly salary, dearness allowance, monthly EPF contribution, and desired retirement age, the calculator provides an estimate of the accumulated corpus available upon retirement.

EPF contributions are calculated based on a fixed percentage of the employee's basic pay and Dearness Allowance. Employees contribute 12 per cent of their salary, while employers match this amount. Out of the employee's contribution, 8.33 per cent is directed towards the Employee Pension Scheme, and 3.67 per cent goes to the EPF.

The EPFO determines the interest rate annually, subject to change. Interest is calculated monthly and deposited into the EPF account at the financial year-end. The EPF balance grows continuously with monthly contributions, earning interest, leading to a cumulative deposit at year-end.