What is EPF (Employee Provident Fund)?
Employee Provident Fund (EPF) is a retirement savings scheme managed by the Employees' Provident Fund Organisation (EPFO) under the Ministry of Labour, Government of India. It is mandatory for organizations with 20 or more employees, and the scheme covers over 7 crore Indian workers.
EPF provides a secure way to build a retirement corpus through regular contributions from both employee and employer. The current EPF interest rate for FY 2025-26 is 8.25% per annum, one of the highest among government-backed savings schemes.
EPF Contribution Structure
Both employer and employee contribute to EPF based on Basic Salary + Dearness Allowance (DA):
Employer Contribution: 12% of Basic + DA, split as:
• 8.33% → Employee Pension Scheme (EPS)
• 3.67% → Employee Provident Fund (EPF)
Note: EPS contribution is capped at 8.33% of ₹15,000 = ₹1,250/month
How is EPF Interest Calculated?
EPF interest is calculated monthly but credited annually at the end of each financial year. The interest is computed on the running balance at the end of each month.
For 8.25% annual rate: 8.25 / 12 = 0.6875% per month
Interest Calculation:
Monthly Interest = Opening Balance × (8.25/12/100)
Interest is calculated on the balance at end of each month
Total interest for the year is credited on March 31st
EPF Tax Benefits
- Section 80C: Employee's contribution (up to ₹1.5 lakh) qualifies for tax deduction
- Interest Exemption: Interest on contributions up to ₹2.5 lakh/year is tax-free
- Taxable Interest: Interest on contributions exceeding ₹2.5 lakh is taxable at slab rates
- Withdrawal: Withdrawals after 5 years of continuous service are tax-free
EPF Withdrawal Rules
Full Withdrawal Allowed:
- On retirement at 58 years of age
- After 2 months of continuous unemployment
- On permanent emigration from India
- On total and permanent disability
Partial Withdrawal (Advance):
- Medical treatment: Up to 6 months' salary or employee share + interest
- Marriage/Education: Up to 50% of employee share (after 7 years)
- Home purchase: Up to 36 months' salary (after 5 years)
- Home loan repayment: Up to 36 months' salary (after 10 years)
EPF vs VPF vs PPF Comparison
| Feature | EPF | VPF | PPF |
|---|---|---|---|
| Interest Rate | 8.25% | 8.25% | 7.1% |
| Eligibility | Salaried (Mandatory) | Salaried (Voluntary) | Any Indian Citizen |
| Employer Contribution | Yes (3.67%) | No | No |
| Max Investment | 12% of Basic | 100% of Basic | ₹1.5 Lakh/Year |
Frequently Asked Questions (FAQs)
What is the EPF interest rate for 2025-26?
The EPFO has declared an interest rate of 8.25% for FY 2025-26. This rate was announced by the Central Board of Trustees (CBT) and applies to all EPF subscribers. The rate may potentially increase to 9% as per preliminary discussions.
How do I check my EPF balance?
You can check your EPF balance through: (1) UMANG App, (2) EPFO Member Portal using UAN, (3) Missed call to 011-22901406 from registered mobile, (4) SMS 'EPFOHO UAN' to 7738299899, or (5) Via EPFO passbook download.
Can I withdraw EPF while employed?
Partial withdrawal is allowed for specific purposes like medical emergency, home purchase, marriage, or education even while employed. Full withdrawal requires unemployment for 2 months or retirement.
What happens to EPF when I change jobs?
Your EPF balance can be transferred to your new employer's EPF account using your Universal Account Number (UAN). The UAN remains the same throughout your career. Transfer can be done online through the EPFO portal.
Is EPF better than mutual funds for retirement?
EPF offers guaranteed returns (8.25%) with zero risk and tax benefits, making it ideal for the debt portion of retirement planning. Mutual funds offer potentially higher returns (12-15%) but with market risk. A balanced approach combining both is recommended.
What is the EPS pension calculation?
EPS monthly pension = (Pensionable Salary × Pensionable Service) / 70. Pensionable salary is average of last 60 months' salary (capped at ₹15,000). Minimum pension is ₹1,000/month after 10 years of service.