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EPF Interest Rate: Taxable Interest on Provident Fund in 2024

Updated: May 20

EPF Interest Rate: Taxable Interest on Provident Fund in 2024

The Employees Provident Fund and Miscellaneous Act, of 1952 established the Employee Provident Fund (EPF), a retirement benefits programme wherein an employee makes a monthly contribution to the plan and the employer matches that amount. The Employee Provident Fund Organisation (EPFO) is in charge of overseeing the Scheme. Upon retirement and during the service term, the employee receives a lump sum payment that includes interest on both the employer's and the employee's contributions (under specific circumstances as stipulated). For the salaried class, this retirement plan is appealing since both the principle and the accrued interest are free from income tax at the time of withdrawal. All entities with 20 or more employees are covered by the scheme, and some businesses are included even if the necessary 20 staff criteria are not met, subject to specific conditions and exemptions. In this article, we will explain all you need to know about taxable interest on EPF in 2024.up to INR 10,000 on interest income, potentially saving a significant portion of earnings from taxes.


Table of Content


EPF Contribution by Employee and Employer

There are two parts to the EPF contribution, which are the employer and employee contributions, depending on the organisation making the contribution. The employee makes contributions to their EPF account equal to 12% of their base pay plus dearness allowance (DA). Employee contributions are reduced to 10% if the company employs fewer than 20 people or if it is in one of the approved industries (such as brick, jute, or beedi). 

A comparable sum is contributed to the programme by the employer (12% of the employee's base pay plus DA). Also, 8.33% of this employer contribution (up to a monthly cap of 1,250 if an employee makes $15,000 or more) goes towards the Employee Pension Scheme (EPS), with the remaining 3.67% going into the employee's EPF account. Additionally, the employer makes a 0.50% contribution to the employee's Employees' Deposit Linked Insurance (EDLI) account.

It is important to remember that employees have the option to make voluntary contributions over the statutory minimum of 12%. These contributions are made to a separate account known as the Voluntary Provident Fund (VPF). Additionally, the VPF offers tax-free interest; but, if an employee wants to participate, the employer is not obligated to make any contributions. 

EPF Contribution Rates

Salary up to Rs. 15,000

  • Employee contribution - 12% of salary

  • Employer contribution- 3.67% of salary

  • Employer contribution to Earnings Pension Scheme (EPS) 8.33% of salary subject to a ceiling of Rs. 15,000 salary (Rs. 1,250)

Salary above Rs. 15,000

The employer's 12% payment is split into two halves if an employee makes at least Rs. 15, 000 in salary. The EPS account receives 8.33% of the Rs. 15,000. i.e., Rs 1,250 monthly, with the remaining cash being sent to the EPF account each month is Rs 550 (3.67% of Rs 15,000). 

EPF Interest Rate in 2023-24

Every year, the interest rate on EPF is reviewed. The interest rate is calculated for the month-by-month ending balance and then for the entire fiscal year after the EPFO releases the interest rate announcement. The Employees' Provident Fund Organisation (EPFO) revealed the interest rate for provident fund deposits for the 2023–2024 fiscal year in February of 2024. The interest rate for 2023–24 was raised by the EPFO from 8.15% to 8.25% from the previous year. The new interest rates are effective for the fiscal year that follows the year they are issued, which is the period from April 1st of one year to March 31st of the following year.

Here are some essential details regarding EPF Interest Rate to keep in mind: 

  • Deposits made into the Employee Provident Fund (EPF) will bear interest at the rate of 8.25%.

  • Despite being computed every month, the interest is only credited to the Employees' Provident Fund account on March 31st of the relevant fiscal year. 

  • To compute interest, the transferred interest is added to the balance for the following month, or April. 

  • Funds deposited in the inactive accounts of retired employees do not incur interest; employees who have not yet attained retirement age may receive interest on their accounts.

  • An EPF account goes dormant or inactive if no contributions are made for 36 consecutive months.

  • The member's slab rate is applied to the interest that is accrued on dormant accounts. 

  • The company's contributions to the Employees' Pension Scheme are interest-free for the employee. Nevertheless, a pension is paid out of this sum after the age of 58.

EPF Interest Rate History 

The following table illustrates the history of the EPF interest rates for the last 10 years.

EPF Interest Rate History 

Details Needed to Calculate the EPF Interest Rate

The information below is needed to determine EPF interest: 

  • The employee's age as of now

  • Current EPF balance 

  • A maximum of Rs. 15,000 per month in basic and dearness allowance is permitted

  • Percentage of the EPF contribution

  • Age of retirement

Each month, the EPF contribution is credited to the EPF account, and interest is calculated monthly. Nonetheless, after the financial year, the entire amount of interest earned will be credited. 8.25% is the interest rate for FY 2023–2024. As a result, the interest rate used to calculate monthly interest will be 0.688%, or 8.25%/12.

Calculation of EPF Interest

Every year, the EPFO sets the interest rate for the EPF plan. The finance ministry verifies the interest rate, which is based on the state of the market. The formula approach or the step method can be used to compute the interest rate. An example of calculating interest with an 8.25% interest rate is provided below:

Consider an example of an employee with a basic salary + dearness allowance equal to Rs.50,000: 

  • Employee contribution to EPF: Rs. 6,000 (12% of Rs.50,000)

  • Employer contribution to EPF: Rs. 1,835 (3.67% of Rs.50,000)

  • Employer contribution to EPS: Rs. 1,250 (8.33% of Rs 15,000)

  • Employer contribution to EPF: Rs. 2,915 (8.33% of Rs 50,000)

The total balance in the EPF account for the employee is Rs. 10,750 (employee contribution of Rs.6,000 + employer contribution of Rs.1,835 and employer contribution towards EPS Rs .2,915.) The total EPF contribution for the first month of service enrollment is Rs. 10,750. 

Interest Rate: 8.25% / 12 months = 0.688%

Monthly EPF Interest:

Month 1’s EPF Interest = Nil 

EPF account balance month 1’s end = Rs. 10,750 

Month 2’s EPF contribution = Rs. 10,750 

Total amount in month 2 of service= Rs. 21,500 

Interest accrued on the EPF contribution in month 2 = Rs. 21,500 * 0.688%= Rs.147.92

EPF contribution balance at the end of month 2 = Rs. 21,500 

EPF contribution in month 3= Rs. 10,750 

Total amount in month 3 of service= Rs. 32,250  

Interest on the EPF contribution in month 3= Rs. 32,250 * 0.688% = Rs.221.88

EPF contribution balance at the end of month 2 = Rs. 32,250 

For the remaining months of the year, a comparable computation is performed. The amount of employer and employee contributions, as well as the interest that was accumulated each month during the year, will be the EPF balance at the end of the year. Additionally, the EPF account's initial amount for the second year will be equal to its ending value from the previous year. Additionally, the initial balance carried forward from the previous year will be used in the calculation of EPF interest for the second year. You can use an EPF calculator to simplify these calculations. 

Tax Benefits on EPF Contributions

Section 80C of the Indian Income Tax Act, 1961 allows for tax benefits for contributions made by employees to PF accounts. Up to Rs. 1 lakh in PF account contributions can be used to qualify for this benefit. You will not be taxed on the amount you give to an employee provident fund account if you do so for five years. However, income tax will be withheld at source (TDS) if your EPF contribution is shorter than five years and you remove your contribution before the full five years have passed.


For salaried workers, the Employee Provident Fund (EPF) is an obligatory retirement and savings plan. Employees must contribute to this fund each month with 12% of their base income, following EPF requirements. Employers contribute to their employees' PF accounts similarly. The EPFO's Central Board of Trustees reviews the interest rate on EPF deposits once a year. Members have multiple options to check their EPF balance, including the Umang App, missed calls, SMS, and the EPFO official website. Members can monitor their total EPF balance, interest earned, and donations by gaining access to their passbook.


Q1. Is the EPF interest rate fixed or variable?

The government sets the interest rates for the EPF. The interest rate is periodically changed by the government. For the financial year 2023–2024, the government has set the EPF interest rate at 8.25%.

Q2. Is EPF interest credited monthly or yearly?

Every month, the EPF account is credited with the contribution, and interest is calculated regularly. Nevertheless, after the financial year, the complete amount of interest will be credited.

Q3. What is the difference between employee and employer PF contributions?

The employee's contribution, which is equal to 12% of their basic income plus DA, is taken out of their paycheck and placed into their EPF account. This is the primary distinction between employer and employee PF. In contrast, the employer pays the employer's contribution directly (i.e., only 3.67% of the employer's share is given to the EPF; the remaining portion is paid to the EPS). 

Q4. Will EPF interest be credited to my account even when I make no EPF contribution?

Yes, an account will continue to receive interest from an ESP even if there hasn't been a contribution for three years. Therefore, if you have not made any contributions to your EPF account due to unemployment or your status as a non-resident Indian (NRI), you will receive interest for three years after the account has stopped receiving payments.

Q5. When will I get EPF interest in my account?

For three years following retirement, you will get interest from your EPF. Your EPF account goes inactive and ceases to accrue interest after three years without any contributions.

Q6. Will I face a loss due to a delay in the EPF interest updation in my passbook?

No, if there's a lag in updating the interest in your passbook, you won't lose any money. An input procedure involves updating the member passbook with the EPF interest. The interest earned for the year is added to the closing balance of that year, which then becomes the opening balance for the next year, so the date the EPF interest is entered into the member passbook has no financial significance.

Q7. Is EPF interest taxable?

The EPF balance is free from taxes up until the retirement date. However, interest received after retirement is subject to taxation as "other sources of income." However, according to Budget 2021, interest earned on contributions beyond Rs. 2.5 lakh will be taxable if deposits in EPF and VPF total more than Rs. 2.5 lakh in a financial year.

Q8. Is interest on EPF taxable after retirement?

Regardless of how long you have contributed to the EPF overall, interest on the accumulated balance after leaving your job (i.e., during non-contribution periods) is taxable.

Q9. Is interest on PF taxable on a contribution over and above 2.5 lakhs?

Yes, interest on an employee's EPF account contribution over Rs 2.5 lakh in a financial year is taxable, per changes in the Budget 2021. TDS applies to this interest as well.

Q10. When is the EPF interest credited?

The EPF Act of 1952 specifies that, starting on the last day of each fiscal year, interest is credited to members' accounts based on their monthly running balances.

Q11. What are the Income tax exemptions on EPF?

According to the EEE model, contributions, interest earned, and withdrawals are all free from income tax. Section 80C of the Income Tax Act allows for the deduction of contributions up to a maximum of 150,000. 

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