Where your PF contributions go
Every month, 12% of your basic + DA is deducted from your salary, and your employer adds another 12%:
| Contribution | Goes to | On ₹30,000 basic + DA |
|---|---|---|
| Your 12% | EPF | ₹3,600 |
| Employer's 8.33% (on wages up to ₹15,000) | EPS — pension | ₹1,250 |
| Rest of employer's 12% | EPF | ₹2,351 |
So of the employer's ₹3,600, only about ₹2,351 builds your EPF balance. The ₹1,250 goes to the Employees' Pension Scheme, which pays a monthly pension later and is not part of the balance shown here.
Some employers contribute only on the ₹15,000 wage ceiling; choose that option in the calculator if your payslip shows an employer EPF contribution of ₹1,800 or less.
How interest is calculated
EPFO calculates interest monthly on your running balance and credits it once a year. The rate for FY 2025-26 is 8.25%, the same as the previous two years. EPFO declares the rate each year, usually in February or March, so long-term projections should use a slightly conservative figure.
What the example shows
Starting at 30 with ₹30,000 basic + DA rising 5% a year and ₹2 lakh already in PF, at 8.25% until 58:
- Your contributions: about ₹25.2 lakh
- Employer's EPF share: about ₹21.0 lakh
- Balance at 58: about ₹1.50 crore, of which more than ₹1 crore is interest
That shows the power of 28 years of tax-free compounding — and why withdrawing PF when you change jobs is costly. Transfer it to your new employer instead (it moves with your UAN).
Tax rules
- Contributions: your 12% counts towards the ₹1.5 lakh deduction (old regime only).
- Interest: tax-free, except on your own contributions above ₹2.5 lakh a year (₹5 lakh if your employer does not contribute). Interest on the excess is taxable each year.
- Employer contribution: taxable if total employer contributions to EPF, NPS and superannuation exceed ₹7.5 lakh a year.
- Withdrawal: tax-free after 5 years of continuous service (including service with previous employers if the PF was transferred).
Boosting your EPF
- Voluntary Provident Fund (VPF): contribute more than 12% at the same interest rate — useful for guaranteed debt-like returns, within the ₹2.5 lakh tax-free limit.
- Avoid early withdrawals: partial withdrawals for housing, education or medical needs are allowed, but every rupee taken out loses decades of compounding.
To see how EPF fits into your full retirement plan, use the retirement calculator; your gratuity is a separate benefit.