How to Calculate PF – Complete Guide To PF Contribution, Interest And Calculation

Key takeaways: 

• A Provident Fund (PF) is a scheme of a savings fund where employees and employers save money every month. 
   
• Provident Fund (PF) is a government introduced retirement savings scheme for employees.
   
• A small part of your salary is contributed in PF when you work in a company exceeding 20 employees. 

Bonus tip: 

The government of India is considering increasing the salary limit of ₹15000 to ₹25000 . This move can bring a large number of employees under the social security net of Provident Fund. 

Provident Fund (PF) is a government backed scheme under which contribution is made by the employee and employer monthly. It is a longer term savings scheme which is meant for the workers in India. PF acts like a safety net for your future when the regular income stops. 

Think of your Provident Fund as a piggy bank in which monthly contribution is done by you and your employer. Your money grows in it till you work and protects your future financially. 

For example, I work in an IT company in Bengaluru and my monthly salary is ₹20,000. 

8.33% of ₹20000 that is ₹1666 will go to my EPS and ₹2400 - ₹1666 = ₹734 will go to the EPF. 

What is the provident fund (PF) ? 

A Provident Fund (PF) is a scheme of a savings fund where employees and employers save money every month. It helps workers save for retirement.

Both employer and employee contribute 12% but only 3.67% of it goes into the employee’s EPF account and rest to the EPS. Employee Pension Scheme (EPS) is introduced to provide monthly pension to the employees after their retirement or in case of any disability. 

For example, if you earn ₹25,000 per month, ₹3000 (12%) will be deducted from your salary. The employer will also contribute ₹3,000 but only ₹1,750.50 will go to your PF account. 

Three schemes that are operated by the Employees Provident Fund Organisation are: 
 

1. The EPF Scheme 1952
2. The Pension Scheme 1995
3. The Insurance Scheme 1976.

How to calculate the Provident Fund ratio? 

Under the EPF scheme, employees make a contribution of 12% every month from their salary. The employer also contributes 12% towards the EPF scheme. However, 12% of the employer contribution does not go to the EPF account. Out of the 12% contribution, 8.33% goes towards the Employee Pension Scheme Account, and the remaining 3.67% goes to the employee EPF account.

For example: I recently got a promotion and I want to check how my PF has changed after the hike: 

The monthly PF after hike of ₹10,800 is the contribution of both my salary deduction as well as my employer’s contribution. 

What is an Employee Provident Fund calculator? 

An EPF calculator is an online calculator which helps you estimate the total value of the PF that you will receive or maturity amount that you will get after your retirement. Details required for the PF calculator are: 

• Monthly contribution by employee and employer
• PF interest rate 
• PF contribution time period 
• Frequency of EPF contribution 

Benefits of using a PF calculator:

• Retirement planning tool: If you are a salaried employee, a PF calculator will help you know the maturity value that you will receive after your retirement. You can easily plan your retirement savings by using this PF calculator. 

• Effortless tracking: the calculator saves you from doing complex manual calculations. It automates the calculation of total contributions and interest made over time. 

Using a PF calculator helps you get instant and accurate results for your future planning. 

For example 1, I am 24 years old and i have started my first job in an IT company with the monthly salary of ₹25,000: 

By using the PF calculator, I realised that starting early can make me have a sufficient amount for my retirement. 

Example 2, I am Neha and I want to know if my PF amount is enough for retirement. 

After using the PF calculator and estimating my total PF amount,I realised that I need additional investments as well for a secured future.

Conclusion: 

Provident Fund (PF) is a sort of safety net as it enables people to save money without stress. It is the contribution of both employee and employer and you can easily know your total maturity amount by using the PF calculator. You can plan your retirement pension by using the calculator instantly.

FAQs: 

Why should I use the EPF calculator?

By using the PF calculator, you can know the estimated maturity amount that you will receive. It can help you to plan your retirement more confidently. 

How to raise a grievance if interest is not calculated for my PF account?

Go to the EPFO grievance portal and choose the type of grievance along with the required documents. 

How does provident fund contribution reduce the income tax?

Under section 80c of Income Tax Act, the amount you contribute every month for the PF is eligible for deduction. Additionally, the interest earned on the PF amount is tax free. 

How are PFs calculated? 

PF is the monthly contribution made by the employer and employee. Both contribute 12% every month and 3.67% goes to the PF whereas 8.33% goes to the employee’s pension scheme (EPS).

What is a PF calculator? 

A PF calculator is an online calculator which helps you estimate the total value of the PF that you will receive or maturity amount that you will get after your retirement.