EPFO retains 8.5% interest on EPF deposits: Here's how it is calculated
- Here’s how you can calculate the EPF interest
The Employees’ Provident Fund Organisation (EPFO) announced 8.5 per cent interest on provident fund deposits for 2020-21 on Thursday, keeping the rate for nearly 50 million subscribers, who use the means to save up for retirement, same as last year. “The EPFO has decided it will pay an 8.5% interest on deposits based on the current position of earnings and deposits of the organisation,” Virjesh Upadhyay, a board member of EPFO, told HT soon after the state-run retirement fund manager’s central board of trustees’ meeting in Srinagar. For 2019-20, EPFO had provided an interest rate of 8.5% and for 2018-19, it had provided 8.65% as the interest rate.
Here’s how you can calculate the EPF interest:
1. Usual method: After the current financial year ends, the interest rates will be notified. Post the notification, EPFO will calculate the month-wise closing balances and the interest for the whole year. This interest is calculated by adding the monthly running balance and then multiplying it with the interest rate and dividing it by 1200.
2. In case of final settlement: If a member is seeking a final settlement and the interest is not notified, then interest is calculated on the basis of the preceding year’s interest rates.
3. In case of withdrawal of sum: If the member has withdrawn any sum during the current year, interest from the beginning of the year till the last date of the month preceding the month in which the withdrawal was made, is considered.
4. On pension contribution: No interest is calculated on pension contributions as benefits are based on the service length and average wages at the time of exit.
5. If the account is inoperative: No interest is credited in this case. The account is considered inoperative if a member has retired on completion of 55 years of age or has migrated abroad permanently or the member has died and no claim has been received for settlement for 36 months from the date when the amount became payable.