Provident Fund Calculator: Almost all salaried individuals in India have an account at the Employees Provident Fund Organisation, which serves as a source of income following their retirement. Every month, a certain amount of money is deducted from the employee’s salary, which is credited to him or her after retirement. The same amount of money is also provided by the employee’s company every month. The Employees Provident Fund Organisation, or EPFO, the top retirement body of the central government, has designed the scheme for employees so that they can fall back on the corpus acquired from it after they retire.
The minimum monthly contribution for the employee is 12 per cent of the basic pay, but he or she can choose to contribute up to 100 per cent of the same. However, the employer does not need to match this figure and can pay the 12 per cent minimum contribution required to be made in PF. The employee gets an interest amount credited to his or her PF account after both the contributions are added together.
How is PF Calculated?
Para 60 of the Employees’ Provident Fund Scheme 1952 mentions the rules related to calculation of Interest on Provident Fund Contributions. It must be noted in this regard that the monthly running balance of the EPF account of the employee is taken into account while calculating the interest. As of now, the government provides an interest rate of 8.5 per cent interest on EPF contributions.
The PF calculations are done on the basis of three main things — Opening balance, contributions during the year and withdrawals during the year. The interest for 12 months is credited on the basis of the closing balance of the PF amount as of the last date of the preceding year, minus the sum withdrawn during the current year.
Formula of PF Calculation
Once the government notifies the interest rate for any Financial Year, and the current year comes to an end, the EPFO calculates the month wise closing balance. After this, the interest for the whole preceding year is calculated by adding the running balance of each month. Then it is multiplied with the interest rate, and then divided by 1,200.
For example, if the interest rate is 8.1 per cent and the sum of monthly balance is Rs 10,00,000, the amount of interest will be 1104740x 8.1/1200= Rs 6,750
Further, the closing balance for that year will be calculated by adding the Opening balance and Contributions, and then substracting the withdrawal and interest.
If a member is taking the final settlement, the interest calculated is added in the amount of settlement. The Employee Share and Employer Share of Provident Fund interests are calculated separately.
The EPFO has recently notified that the PF money can be withdrawn via the government’s UMANG App — an unified app to access various pan-India services. It can also be withdrawn via the UAN portal.
Read all the Latest Business News here
Comments
0 comment