EPF (Employee Provident Fund): Calculation, Benefits, & Comparison

Author
By Hiral Vakil on March 2, 2019

Employee Provident Fund (EPF) is nothing but a savings scheme for employees.  Every month a portion of your salary is deducted towards EPF. This fund can be availed when you are unable to work or when you retire.

EPF Calculation

Employee’s Contribution to PF: 12% of your Basic Salary + DA (Comes out of your Salary).

The Employee Contribution goes entirely towards the EPF Scheme.

Employer’s Contribution to PF: 12% of your Basic Salary + DA (Comes out of your Employer’s Pocket).

The Employer Contribution gets split up as follows:

  • 3.67% into EPF
  • 8.33% into EPS

EPF Tax Benefits 

Employee’s contributions to EPF is tax deductible under section 80C, while the employer’s contribution is completely tax-free. Any withdrawal after the specified period (5 years) is exempt from income tax.

Tax Savings & Deductions

EPF Rate of Interest

An interest rate is determined by the government and central board of trustees. Any interest earned towards credit standing in one’s PF account is deposited on 1st April of every year. Historically PF has earned interest between 8% to 12%. For FY 2018-19 interest rate is 8.65%. Interest accumulated during employment is taxfree. 

How to check EPF balance?

Comparison of different tax saving investments

InvestmentsReturnsLock-In-PeriodRisk
ELSS 12-15%*3 YearsMarket Risk
FD7-9 %* 5 YearsRisk-Free
NSC8%5 YearsRisk-Free
NPS8-10%*Till RetirementMarket Risk
PPF8%15 YearsRisk-Free

All the above tax savings investment options are tax deductible under section 80C up to Rs. 1,50,000. (*Subject to change)

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