Employee Provident Fund (EPF)
EPF Scheme
Employee Provident Fund (EPF): Rates, Contributions & Rules
Employee Provident Fund (EPF) is an old-age pension scheme maintained by the Employees' Provident Fund Organization (EPFO). The employee and the employer contribute to the EPF scheme on a monthly basis in equal proportions of 12% of the basic salary and dearness allowance. Out of the employer's contribution, 8.33% is directed towards the Employees' Pension Scheme. The interest rate on EPF is reviewed annually.
EPF rate for FY 2020-21 was 8.5%. (See the updated FY 2025-26 rate further below, which has since replaced this figure.) Once EPFO notifies the rate for a year and the year ends, the rate is calculated for the month-wise closing balance and then for the whole year. The year in which the new interest rate is announced stays valid for the following year, i.e., from the year beginning on 1st April to the year ending on 31st March of the next year.
Important Facts About EPF Interest Rate
The interest rate, i.e., 8.50% (for FY 2020-21), was valid and applicable only on EPF deposits made between the months of April 2020 and March 2021.
The interest, even though calculated on a monthly basis, is transferred to the Employees' Provident Fund account only on a yearly basis on 31st March of the applicable year. The transferred interest is added to the following month's (i.e., April's) balance and is not otherwise used for calculation of interest.
If a contribution isn't made into an EPF account for 36 months continuously, the account becomes dormant or inoperative. Interest is available on inoperative accounts of workers who haven't reached retirement age.
Interest isn't provided on the amount deposited in inoperative accounts of retired workers.
The interest earned on inoperative accounts is taxable as per the member's slab rate.
For contributions made towards the Employees' Pension Scheme by the employer, the employee shall not receive any interest. However, a pension is paid out of this amount once the employee reaches the age of 58.
EPF Rate Calculation Example
| Contribution Start Month | November 2018 |
| Interest Rate (p.a.) | 8.5% |
| Monthly Interest Rate | 8.50/12 = 0.7083% |
| Employee's Contribution | 12% of Rs. 15,000 = Rs. 1,800 |
| Employer's Contribution | Rs. 1,800 (8.33% in Pension, 3.67% in EPF) |
| Employer's Actual Contribution to EPF Account | 3.67% of Rs. 15,000 = Rs. 550 |
| Total Monthly Contribution in EPF Account | Rs. 1,800 + Rs. 550 = Rs. 2,350 |
The employer and employee make equal contributions to the EPF account, as shown below:
| Contribution By | Monthly Share Contributed |
|---|---|
| Employer | 12% |
| Employee | 12% or 10% |
| Total | 24% |
Key Points Regarding EPF Contribution
The employer's 12% contribution includes 3.67% towards EPF and 8.33% towards EPS.
A 10% EPF share is valid for organizations with 20 or fewer employees, organizations with accumulated losses equal to or exceeding their net worth (at the end of the financial year), or organizations declared sick by the Board for Industrial and Financial Reconstruction.
The total contribution made by the employer is split as 8.33% towards the Employees' Pension Scheme and 3.67% towards the Employees' Provident Fund. The entire contribution made by the employee goes towards the employee's provident fund.
Apart from the contributions made above, an additional 0.5% towards EDLI must be paid by the employer. Certain administration charges towards EDLI and EPF, standing at the rate of 1.1% and 0.01% respectively, also have to be incurred by the employer. This means the employer must contribute a total of 13.61% of the earnings towards this scheme.
The contribution from both parties is deposited into the EPFO (Employees' Provident Fund Organization). This is a long-term investment fund for the contributors, helping them lead an independent life after retirement.
Updated EPF Interest Rate: FY 2025-26
The EPF interest rate has changed since the FY 2020-21 figure referenced earlier in this article. Here's the current picture:
Current rate: 8.25% for FY 2025-26. EPFO's Central Board of Trustees (CBT) has kept the rate unchanged at 8.25% for the third consecutive year, applicable on the closing balance up to 31st March 2026.
Tax on high contributions: Interest earned on employee contributions exceeding βΉ2.5 lakh in a financial year is now taxable (the threshold is βΉ5 lakh for government employees where there is no employer contribution to EPF).
EPF Interest Rate: A 10-Year Snapshot
| Financial Year | Interest Rate (p.a.) |
|---|---|
| 2016-17 | 8.65% |
| 2017-18 | 8.55% |
| 2018-19 | 8.65% |
| 2019-20 & 2020-21 | 8.50% |
| 2021-22 | 8.10% |
| 2022-23 | 8.15% |
| 2023-24 | 8.25% |
| 2024-25 | 8.25% |
| 2025-26 (current) | 8.25% |
Additional Updated Points: EPF continues to fall under the Exempt-Exempt-Exempt (EEE) tax regime — contributions, interest, and maturity proceeds all remain tax-free (subject to the βΉ2.5 lakh contribution threshold noted above). Employees can also claim a tax deduction of up to βΉ1.5 lakh under Section 80C for their own EPF contributions. EPFO has also significantly improved claim processing efficiency, settling a record 2.16 crore auto-claims in FY 2024-25, up from 89.52 lakh the year before — making withdrawals and transfers noticeably faster than in previous years.
Even with interest rates holding steady in recent years, EPF remains one of the most reliable, tax-efficient retirement savings tools available to salaried employees in India, thanks to its sovereign backing and disciplined, long-term compounding structure.