The Employees’ Provident Fund Organisation (EPFO) runs a social security scheme that most employees of the organised sector adopt. EPF one of the most long-term, safest, tax-efficient and guaranteed return schemes that are available to any employee. The EPFO interest rate is so high that it makes this scheme a massive money-making tool for employees in India. The entire scheme has been designed to make available to an employee retiring after a long working life a neat pool of funds that can sustain him/her and the family for the golden years of his/her life.
EPF interest rate that is applicable to the accumulated funds is decided each year. The interest that will be applicable for FY24 is 8.25%.
The EPF interest rate is decided by the Central Board of Trustees (CBT) of EPFO and subsequently approved by the Union finance ministry.
The EPF interest rate for FY23 was determined at 8.15%.
Any employee will be curious to know what interest will be paid to him on the amount that has accrued in his account.
Every month an employer (registered under EPFO) is supposed to deduct 12% of the basic + DA of any employee and deposit the amount in his/her name maintained with the EPFO. The employer also makes a matching 12% contribution, which is split into two parts – 8.33% goes to a pension fund maintained an administered by the EPFO and the other 3.67% goes to the same PF account of the employee.
The EPF interest rate arithmentic
Now let’s see how much interest will an employee get if there is Rs 5 lakh in his EPF account.
Since the interest is 8.25%, if an employee has Rs 1 lakh deposited in his/her PF account till the end of FY24 (March 31, 2024), he/she will get an interest of Rs 8,250.
If someone has Rs 5 lakh deposited in the EPF account, the interest that will accrue will be five times that amount or Rs 41,250. In other words, the amount of money will be Rs 5 lakh + Rs 41,250 = Rs 541,250.
Similarly, if anyone has Rs 8 lakh in the PF account till March 31, 2024, the interest component for FY24 will add Rs 66,000 as interest and swell his kitty to Rs 8 lakh + 66,000 = Rs 866,000.
A fund of Rs 10 lakh in the PF account of an employee will beget him Rs 82,500 as interest bringing the total amount in the account to Rs 10,82,500.
EPFO: Things to remember
However, one has to keep in mind that the EPF balance amount in an employee’s account is likely to be more when the interest amount is added. The reason: when interests are added, a few months would have already passed in the new financial year and the balance would reflect the fresh contributions from the employee and the employer in the account.
By the way, if an employee had a PF account between 1989 to 1999, he/she would have got an interest rate of 12% on his accrued funds which was the record high.
With 12% interest rate, one’s funds can double in six years flat.
The EPFO interest rate that employees will get was hiked from 8.15% in FY23 to 8.25% in FY24. How much interest will it bring to an employee who has Rs 5 lakh or Rs 10 lakh in his EPF account? Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
