How to Calculate Your Employers EPF Contribution | Bajaj Finance (2024)

How to calculate EPF contribution

This amount is calculated each month. To simply the math, assume that your basic salary is Rs. 25,000, including dearness allowance. Your contributiontowardsEPFis 12% of Rs. 25,000, which amounts to Rs. 3,000 each month. Your employer’s contribution towards EPF is 3.67% of Rs. 25,000, which comes to Rs. 917.50 per month.

• Your employer’s contribution towards Employee Pension Scheme (EPS) is 8.33% of Rs. 25,000, which comes to Rs. 2,082.50 per month.
• However, as per the norms, your employer can only contribute a maximum of 8.33% of the threshold amount of Rs. 15,000 towards your EPS. This means that your employer can only contribute a maximum of Rs. 1,249.50.
• So, the difference between what the employer can transfer and the maximum stipulated amount, in this case, Rs. 833 (Rs. 2,082.50 - Rs. 1,249.50), is transferred to your employer’s EPF contribution.
• So, your employer’s total EPF contribution becomes Rs. 2,915.50 as Rs. 833 is added to the initial amount of Rs. 2,082.50. As per EPFO guidelines, this amount is rounded off to the nearest decimal, making the total Rs. 2,915.

So, the total EPF contribution (by you and your employer) for a month amounts to Rs. 5,915 (Rs. 3,000 + Rs. 2,915).

To check whether your employer is making contributions towards your EPF account or to see your account balance, you can use yourUANand log into your EPF account on the EPFO member portal.

Information Needed to determine the EPF Interest Rate

The information below is needed to determine EPF interest:

• The current age of an employee.
• Current EPF balance.
• Monthly basic and dearness allowance of up to a maximum of Rs. 15,000.
• Percentage of contribution to EPF.
• Retirement age.

Each month, the EPF contribution is credited to the EPF account, and interest is calculated monthly. Nonetheless, at the conclusion of the fiscal year, the entire amount of interest earned will be credited. 8.25% is the interest rate for FY 2023-2024. Because of this, the interest rate for each month's interest computation will be 0.679%, or 8.25%/12.

Benefits of EPF Contribution

1. Retirement Corpus: EPF serves as a retirement savings fund, ensuring financial security after employment.
2. Tax Benefits:Employee contributions to EPF are eligible for tax deductions under Section 80C of the Income Tax Act.
3. Financial Security:EPF acts as a safety net, offering financial stability during unforeseen circ*mstances.
4. Loan Facility:Members can avail loans against their EPF balance for specific purposes like home purchase or education.
5. Nomination Facility:EPF allows members to nominate beneficiaries, ensuring a smooth transfer of benefits in case of the member's demise.
6. Withdrawal Options:Members can make partial withdrawals for specific needs like education, medical emergencies, or home purchase.

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