## What is the formula for calculating EPF?

If you wonder about the Employee Provident Fund calculation on salary or how it is implemented, here’s what you need to know: salary-paying employees contribute each month a set amount.

It is possible for an employee to contribute as much as 100% of their salary base through a matching contribution, which is paid by the company. The minimum matching contribution per month is 12% of basic pay.

When you combine the employee’s contributions and the employer’s contributions, the interest earned is added to the employee’s PF account. Employers do not have to match voluntary contributions made by their employees.

Every financial year, the government specifies the EPF Interest Rate. The EPF Interest Rate for FY 2021-22 is 8.1%. Paragraph 60 of the Employees’ Provident Fund Scheme 1952 specifies the rules for calculating interest rates on contributions to the Provident Fund.

Interest earned on an EPF account is added to the monthly running balance. Calculating the interest amount requires a full understanding of three factors: the opening balance of the EPF account, contributions made throughout the year, and any withdrawals made during the year.

A 12-month balance plus any money withdrawn over the year will calculate the interest accrued over the 12-month period.

The interest earned on PF contributions that were credited throughout the current fiscal year will be credited to the PF account on the last day of the current year if the contributions had been credited throughout the current fiscal year.

## Provident Fund Calculation Formula

When an interest rate is notified of the Financial Year, the month-by-month closing balance is determined, and the year in progress ends at the end of the month. To calculate annual interest, just add up the running balance for each month and multiply it by 1200.

The amount of interest equals *1,04,740* 8.65/*1200, if the interest rate is 8.65%.

Opening balance contributions minus withdrawals plus interest would result in the balance at the end of each year which equals to ₹112345 + ₹1200 – ₹25000 + ₹7963 = ₹96508

Participants who make a final settlement are required to include the interest calculation in their settlement amount.

## How to Calculate Retirement EPF Amounts

If a person wants to calculate how much they will receive in retirement, he or she must follow the following steps.

- You must enter your date of birth and retirement age (maximum of 58 years) in the appropriate box.
- The second step is to enter your basic monthly pay, as well as the expected annual increase of your basic salary in India.
- Providing the employer’s contribution as well as the employee’s contribution is step 3.
- As part of Step 4, offer the federal government’s interest rates on the balance of the EPF account.

In this calculation formula, the EPF calculation process is completed and the final result is displayed.

### Employee Contribution to EPF

In addition to their base salary, employees pay 12% of their Dearness Allowance into the EPF each month.

The employee contribution, for example, follows the salary of Rs.20,000 as the base salary. Employees contribute 12% of that amount, or Rs.2400 per month.

### Employer Contribution to EPF

Employers must pay 8.33% of EPF to the EPS (Employee Pension Scheme); the remaining 3.67% must go towards EPF. Therefore, 3.67% of Rs.20,000 is Rs.734.

For someone earning Rs.20,000 in salary, the monthly contribution to an EPF account is the employee contribution plus the employer contribution, which is Rs.2400 + Rs.734 = Rs.3134.

You can use an **pf calculator online** if you feel this calculation is tricky.

## How Does an EPF Calculator Work?

Every time a person enters the correct details about their monthly EPF contributions, the EPF calculator calculates the correct amount.

After retirement, people can use this calculator to calculate how much lump sum they will have in their EPF account. You’ll get the exact PF for basic salary calculations based on the employee’s contribution, employer’s contribution, and interest payment.

Individuals can enter formulas on the EPF calculator, which gives them the option to enter information such as their age, monthly salary, EPF contribution, and dearness allowance.

Input the current amount as well, and the calculator will display the approximate amount of EPF when you retire.

EPF calculators are accessible online, making the process easier.

## Advantages of EPF Calculator

- In order to determine the amount of accumulated funds at the end of a career, individuals can use the EPF calculator.
- Other investments can be planned efficiently by members.
- In order to achieve the desired amount upon retirement, people can raise the percentage once they understand how much they will earn from their EPF funds.
- For those who wish to retire earlier, they can increase their contributions to their retirement plans.

In order to make certain decisions, salaried people need knowledge of EPF calculation. Direct calculation may seem difficult to some people, so the EPF calculator is a simple, straightforward method.

## Tax Benefits for EPF contributions

The Indian Income Tax Act, 1961, provides tax benefits for PF contributions in accordance with article 80C. The benefit is available for contributions up to $1 lac.

You won’t be able to take advantage of a tax deduction for the amount you contributed if you contribute for five years to the employee provident fund account. Your EPF contribution will, however, require you to pay TDS if the time you contribute is shorter than 5 years and you withdraw your contribution before that period.

**Conclusion**

When it comes to your EPF, remember that it is a long-term instrument. If you want to meet short-term financial goals, do not withdraw funds from your EPF.

Assume you have mostly short-term goals, such as funding your child’s education over the next couple of years as a young couple or parent.

If you are concerned about risk and your timeframe for reaching your goal, you may want to invest only the minimum amount in your EPF and direct the remainder to a liquid asset.

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