EPFO slashed PF interest rate: Before Holi, the Modi government has given a tremendous blow to 6 crore employees. Actually, the Employees’ Provident Fund Organization (EPFO) has announced a cut in the interest rate for the financial year 2021-22. EPF has reduced the interest rate on the amount deposited in the PF account from 8.5% to 8.1%. Let us tell you that this rate is the lowest in the last 45 years. Earlier in the year 1977-78, EPFO had given 8% interest. Since then it has been 8.25% or more.
Let us tell you that EPFO fixes the interest rate for the EPF scheme on an annual basis. The interest rate depends on the market conditions and is reviewed by the Ministry of Finance. The interest rate for the financial year 2021-22 has been kept at 8.1%. So let’s know how much loss you will have after reducing the interest rate on PF?
What are the rules of EPFO?
Explain that 12% of the amount made by adding basic salary and dearness allowance of an employee is deposited in his PF account. Out of 12% of the company’s contribution, 3.67% goes to the employee’s PF account (EPF) and the remaining 8.33% goes to the Employees’ Pension Scheme (EPS). Explain that the contribution of the company is divided into two parts, one part goes to the pension fund ie EPS and the other part goes to the EPF.
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PF Interest Rate Calculation-
For example, let’s assume the basic salary and dearness allowance (DA) together is ₹15,000 and the current rate of interest is 8.1%.
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How to Calculate Interest?
Basic Salary + DA= ₹15,000
Employee’s contribution to EPF = 12% of ₹15,000 = Rs 1,800
Company’s contribution to EPS = 8.33% of ₹15,000 = Rs 1,250
Company’s contribution to EPF = Rs 1,800-1,250 = Rs 550
Total EPF contribution every month = ₹ 1,800 + ₹ 550 = Rs 2,350
The interest rate for 2021-22 is 8.1%. Accordingly, interest every month will be 8.10% / 12 = 0.675%. Which was earlier available at 0.7083% as against 8.5%.
Total EPF contribution for the first month = ₹ 2,350
If you have started the job from 1st April, then you will not get the interest on EPF contribution on the contribution of the first month of the job. You will start getting interest from the second month i.e. May.
Total EPF contribution for April = ₹ 2,350
Total EPF contribution for May = ₹4,700
Interest on EPF contribution for May = ₹ 4,700*0.675% = Rs 31.72 as against Rs 33.29 earlier.