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A Step-by-Step Guide: How to Calculate PF on Salary

A Step-by-Step Guide: How to Calculate PF on Salary

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Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.

Social security is a cornerstone of modern society, providing protection and support to the people. In India, the legacy of social security protection dates back to 1925, with the passing of the first Provident Fund Act. This act paved the way for a reliable retirement scheme for countless Indians.

If you are an employee in India, a portion of your salary is likely contributed towards the Employees Provident Fund (EPF). As a result, EPF calculation on salary becomes an integral part of payroll management and annual accounting processes. Although it may seem complex at first, the calculation is quite simple.

EPF Basics

The EPF is a retirement scheme introduced by the Employees Provident Fund Organisation (EPFO). It applies to people working in private companies with 20 or more employees.

As per the scheme, a fixed portion of the salary is contributed to the fund each month by both the employee and the employer. Upon retirement, the employee can withdraw a lump sum, including the interest.

It has 3 main components:

  • Employee’s Contribution: 12% of Basic Salary, including Dearness Allowance.
  • Employer’s Contribution: 8.33% goes to the Employee Pension Scheme, and 3.67% goes to the employee’s EPF account.
  • Interest: the EPF interest rate is fixed by EPFO. For FY 2022-23, it is fixed at 8.1%.

Step-by-Step Guide on How to Calculate PF on Salary

To calculate EPF, you will need the following information:

  • Basic salary,
  • Dearness Allowance,
  • Duration of employment,
  • Your current EPF balance (in any), and
  • Existing EPF interest rate.

Once you have all the details, follow these steps.

Step 1: Calculation of Employee’s Contribution

This will be 12% of the salary (basic + dearness allowance). Suppose this salary amount comes to ₹20,000. Then the employee’s contribution will be 12% of ₹20,000, that is ₹2,400.

Step 2: Calculation of Employer’s Contribution

Employer’s contribution will be bifurcated into two parts: (i) ₹734 (3.67% of ₹20,000) to be added to the employee’s fund and (ii) ₹1,666 (8.33% of ₹20,000) which will be contributed to the Employee Pension Scheme.

Step 3: Calculation of Interest

On a total contribution of ₹3,134 (₹2,400 + ₹734), interest will be calculated at 8.1% p.a. Thus, the monthly interest amount will be computed as: ₹3,134 x 8.1%/12 months, which comes to ₹21.15.

If an existing balance exists in your EPF account, it will also be considered for computation of interest. The calculation is done for all the subsequent months similarly.

How to Calculate PF Amount from Salary using PF Calculator?

Manually calculating the PF amount is not as difficult. But why go through the hassle when you can use Fi Money’s PF Calculator instead? With three easy steps, you can quickly get your total retirement corpus.

Step 1: Enter your present age, retirement age, current salary, and expected growth in salary.

Step 2: Check if any existing EPF balance is available on the EPF portal. If yes, enter the amount.

Step 3: The calculator will automatically consider the applicable interest rate and instantly give you the corpus amount. It’s that simple!

How to Calcuate PF Interest?

Read this blog to figure out how to calculate interest on PF.


EPF calculation on salary is an important part of financial planning for salaried employees. However, consider opening a salary account with Fi to optimise your take-home pay. Partnered with RBI-licensed Federal Bank, adds 10% of your salary in the form of Fi-Coins. You can also enjoy a free VISA Platinum debit card with zero forex charges and no minimum balance requirement. Moreover, Fi's built-in financial management tools, including Connected Accounts, Analyser, Goal-based saving, SIPs, and more, make it easy to manage and grow your money.

Frequently Asked Questions

1. What is PF (Provident Fund), and why is it important to calculate it on salary?

Provident fund is a retirement savings scheme for Indian employees. The contribution is based on a fixed percentage of their salary. It helps determine how much is deducted from their monthly salary and what portion is being saved for retirement.

2. How can I calculate PF on salary step-by-step?

For EPF calculation on salary, begin by adding your basic salary and dearness allowance. Next, calculate your contribution, 12% of the above total. Then, determine your employer's contribution, typically 3.67% of your total salary. Finally, add both contributions together to obtain the total PF amount for your salary.

3. What are the key components, rates, and rules involved in PF calculation on salary?

The key components of PF calculation are employee/employer contributions and interest. As per the rules, EPFO sets the interest rate, which is currently at 8.1%. While an employee contributes 12% of salary + DA, the employer contributes 3.67% to the employee's PF and 8.33% to Employee Pension Fund.

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