The Employees’ Provident Fund (EPF) is one of the most trusted retirement savings schemes for salaried employees in India. Managed by the Employees’ Provident Fund Organisation (EPFO), EPF makes saving automatic: a part of your salary is deposited every month and earns interest. This guide explains how EPF is calculated, how the employer’s contribution is split, worked examples, important rules, withdrawal options, tax treatment and frequently asked questions with practical examples.
Before diving into long examples and calculations, here’s a quick glance at the rules you will see again and again in this article. These are the basic building blocks you need to understand to calculate EPF correctly.
| Factor | Rule (Simple) |
|---|---|
| Employee Contribution | 12% of Basic Salary + Dearness Allowance (DA) — entire amount goes to EPF |
| Employer Contribution | 12% of Basic + DA — split between EPF and EPS (pension) |
| EPS (Pension) Portion | 8.33% of salary — calculated only up to ₹15,000 (max ₹1,250/month) |
| Employer EPF Portion | Remaining part of employer’s 12% after EPS is taken out — this goes into EPF and earns interest |
| EPF Interest | Declared annually by EPFO (historically around ~8%–8.5%) — interest accrues monthly and is credited yearly |
EPF (Employees’ Provident Fund) is a government-regulated savings scheme where a portion of your salary is set aside every month to build a retirement corpus. The idea is simple: you save a fixed percentage while employed, your employer adds a matching share, and the corpus grows with interest. Over time this small recurring amount becomes a significant lump sum that you can withdraw at retirement or under qualifying circumstances.
EPF works together with the Employees’ Pension Scheme (EPS). Your employer’s contribution is split between the EPF account (which earns interest) and EPS (which funds your monthly pension after retirement). Understanding the split and the salary limit for EPS is the key to calculating how much actually lands in your EPF every month.
Let’s break the calculation into two simple steps: the employee’s share and the employer’s share. Each month your salary slip will usually show both these deductions separately or combined under “PF”.
You contribute 12% of your Basic Salary + Dearness Allowance (DA). This entire contribution is deposited into your EPF account and earns EPF interest. For example, if your Basic + DA is ₹20,000 per month, your contribution is 12% of ₹20,000 = ₹2,400. This amount will be credited to your EPF balance and compounded annually at the declared interest rate.
Your employer also contributes 12% of your Basic + DA each month, but the employer’s amount is not fully credited to EPF. The employer’s 12% is split into two parts:
Important: EPS is computed on a salary ceiling of ₹15,000 even if your actual Basic + DA is higher. Because of this cap, the maximum EPS contribution from the employer is ₹1,250 per month (8.33% of ₹15,000). The balance of the employer’s 12% goes to EPF.
Let’s take a practical example to make the split crystal clear. Use this pattern to calculate any other salary later by replacing the numbers.
12% of ₹20,000 = ₹2,400. This full ₹2,400 is credited to your EPF account and will earn interest.
Employer also contributes 12% of ₹20,000 = ₹2,400. But this is split:
Total EPF credited monthly: Employee EPF (₹2,400) + Employer EPF (₹1,150) = ₹3,550.
Total EPS (for pension): ₹1,250.
| Component | Monthly | Yearly |
|---|---|---|
| Employee EPF (12%) | ₹2,400 | ₹28,800 |
| Employer EPF (3.67%) | ₹1,150 | ₹13,800 |
| Employer EPS (8.33%) | ₹1,250 | ₹15,000 |
| Total EPF | ₹3,550 | ₹42,600 |
When your Basic + DA is less than ₹15,000, EPS is calculated on the actual Basic. So:
This shows that for lower Basic salaries, both EPF and EPS are smaller in absolute terms, but the percentage rules remain identical.
EPS is capped at ₹15,000 for calculations:
You can use these two worked patterns to approximate contributions for any Basic + DA value: compute 12% for employee, compute 12% for employer, subtract capped EPS if salary exceeds ₹15,000 and the remainder is employer EPF.
EPF interest is declared annually by EPFO. Interest is calculated monthly on the running balance and then credited to your account at the end of the financial year. Practically this means the interest on your opening balance and on monthly contributions is computed for each month and then aggregated.
Example formula for one month (simplified):
Monthly Interest = (Opening Balance + Monthly Contribution) × (Annual Interest Rate / 12 / 100)Over years this monthly compounding makes the EPF corpus grow significantly, which is why staying in the scheme for long durations produces strong retirement savings.
EPF is portable. When you change jobs, you should transfer your EPF account to the new employer instead of withdrawing it. Transfers keep your corpus intact and preserve continuity for pension eligibility. Thanks to the Universal Account Number (UAN), transfers can be done online through the EPFO portal and usually take a few days.
Withdrawals are permitted under certain conditions: full withdrawal on retirement, partial withdrawals for house purchase/repairs, medical emergencies, marriage, higher education, or unemployment (after two months). Each withdrawal type has its own rules and limits. For example, for house purchase the limit may be a significant percentage of your own contribution, whereas for marriage or education it is often limited to a portion of the balance.
Employee contributions to EPF qualify for deduction under Section 80C (subject to the overall ₹1.5 lakh limit). The interest earned and the maturity amount are tax-free if you have completed at least five continuous years of service before withdrawal. If you withdraw before completing five years of continuous service, the withdrawal amount may become taxable and certain TDS rules may apply. It’s always a good idea to retain documentation and PAN details to avoid unnecessary tax deductions at source.
There are multiple convenient ways to check your EPF balance. Pick the method that suits you: online, app-based, SMS or a simple missed call.
EPF is mandatory for establishments employing 20 or more people, and for employees whose salary is up to a certain threshold (rules may vary; employers sometimes extend benefits voluntarily). The advantages of EPF go beyond the immediate monthly savings – you get steady, government-backed returns, tax benefits, and insurance cover under EDLI (Employees’ Deposit Linked Insurance) which provides a lump-sum to nominees in unfortunate events.
The EPS component ensures that eligible employees receive a small but steady pension after retirement. While EPS itself does not earn interest like EPF, the pension is calculated using a formula that takes account of years of service and average salary. Together, EPF + EPS provide both a retirement corpus and a recurring pension component.
The employee contribution is 12% of Basic Salary + DA. This entire amount is deposited into your EPF account and will earn interest. If your salary is structured differently, ensure “Basic + DA” is correctly identified on your salary slip before calculating 12%.
Yes. Employers contribute 12% of Basic + DA as well. However, this employer share is split: 8.33% goes to EPS (pension) — calculated on a ceiling of ₹15,000 — and the remaining portion (usually 3.67%) goes to EPF.
No. EPS is not an interest-bearing account. EPS contributions are used to calculate your monthly pension after you retire, based on a formula that considers years of service and a notional salary figure.
EPS is calculated on a salary ceiling of ₹15,000. So the maximum EPS contribution from the employer is 8.33% of ₹15,000 = ₹1,250 per month. Anything above this in employer’s 12% goes into EPF.
You can check via the EPFO member portal (UAN login), the UMANG mobile app, the SMS service, or the missed-call service. For online services, make sure your UAN is activated and linked to your current employer and mobile number.
EPF contributions are eligible for deduction under Section 80C up to the overall limit. Interest and withdrawal amounts are tax-free only if you have completed five continuous years of service. Withdrawals before completion of five years may be taxable as per the prevailing rules.
You should transfer your old EPF account to the new employer using your UAN. This preserves your service history and EPS eligibility. An active UAN makes transfers hassle-free and mostly online.
Partial withdrawals are permitted for specific reasons like purchasing a home, medical emergencies, marriage and education, and certain other conditions. Full withdrawal is generally allowed on retirement or after termination of service subject to lock-in norms.
EPF is more than a line item on your salary slip. It is a disciplined, automatic savings mechanism that builds a significant retirement corpus over the years. By understanding how your own contribution and the employer split work, you can better estimate your monthly savings, plan transfers when you change jobs, and make informed decisions about partial withdrawals if required.
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