EPF (Employee Provident Fund): Calculation, Benefits, & Comparison
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.
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.
Comparison of different tax saving investments
| Investments | Returns | Lock-In-Period | Risk |
| ELSS | 12-15%* | 3 Years | Market Risk |
| FD | 7-9 %* | 5 Years | Risk-Free |
| NSC | 8% | 5 Years | Risk-Free |
| NPS | 8-10%* | Till Retirement | Market Risk |
| PPF | 8% | 15 Years | Risk-Free |
All the above tax savings investment options are tax deductible under section 80C up to Rs. 1,50,000. (*Subject to change)