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How much interest you get on PF, and how EPFO works it out each month

Updated on 18 October 2026

The short answer. 8.25% a year, the rate EPFO's Central Board of Trustees recommended for 2025-26, the same as 2024-25. Interest is worked out every month on the balance at the start of that month and credited once, at the end of the financial year. On ₹30,000 basic, the first year's contributions earn ₹2,322 of interest.

PF interest is not paid on your salary or on what you put in this month. It is paid on the balance sitting in the account, so it is small in the first year and large later, once the balance has grown. Below is how the monthly arithmetic works, a worked example, and what changes the figure. The PF Calculator runs it for your own basic pay and age.

What goes into PF each month

PF is worked out on "wages": basic pay plus dearness allowance (DA).

Who pays Share of basic + DA Where it goes
You 12% your EPF account
Your employer 12% of which 8.33% of wages up to ₹25,000 (at most ₹2,083) goes to the Employees' Pension Scheme (EPS), and the rest to your EPF account

Only the EPF part earns PF interest. The EPS share builds a pension, not your balance. The ₹25,000 wage ceiling applies from 17 September 2026; it was ₹15,000 from 1 September 2014 until then.

Basic + DA You Employer to EPF Employer to EPS Into EPF each month
₹15,000 1,800 550 1,250 2,350
₹20,000 2,400 734 1,666 3,134
₹30,000 3,600 1,517 2,083 5,117
₹50,000 6,000 3,917 2,083 9,917

People who joined after 1 September 2014 with wages above the ceiling, and still above ₹25,000 on 17 September 2026, are not EPS members, so the employer's whole 12% goes to EPF: ₹6,000 on ₹50,000 basic. Some employers work contributions out on the ₹25,000 ceiling only, whatever the basic; then you pay ₹3,000 and the employer ₹917 into EPF.

How the interest is worked out

  1. Each month, interest accrues at 8.25% ÷ 12 = 0.6875% on the balance at the start of the month.
  2. That month's contribution is credited at the end of the month, so it starts earning from the next month.
  3. The twelve months of interest are added up and credited once, at the end of the financial year (March).

With the same contribution C every month and an opening balance B, one year's interest is:

Interest = B × rate + C × 66 × rate ÷ 12

The 66 is 0 + 1 + 2 + … + 11: April's contribution earns for 11 months, May's for 10, and March's for none.

A worked example

Basic pay ₹30,000, so ₹5,117 goes into EPF every month.

The first year, starting from nothing. B = 0, so the interest is 5,117 × 66 × 0.0825 ÷ 12 = ₹2,322. Contributions for the year are 12 × 5,117 = ₹61,404, and the closing balance is ₹63,726.

A year with ₹5,00,000 already in the account. The old balance earns 5,00,000 × 8.25% = ₹41,250, and the year's contributions earn ₹2,322 as before. Interest = ₹43,572, and the balance becomes 5,00,000 + 61,404 + 43,572 = ₹6,04,976.

To retirement. Starting at 25 on ₹30,000 basic, with a 5% raise every year, the balance at 58 comes to ₹1,99,54,665. You put in ₹34,58,724 and your employer ₹26,33,856; interest makes up ₹1,38,62,085, about 69% of the total. A further ₹8,24,868 went to EPS. In the last year alone, the interest is ₹15,04,830.

One rate change. At 8.15% instead of 8.25%, the same career ends at ₹1,96,18,119, which is ₹3,36,546 less. EPFO fixes the rate every year, so the long-range figure is an estimate.

If the figure in your passbook looks wrong

  • No interest shows for months. Interest is credited once a year, after the financial year ends and the rate is ratified. Until then the passbook shows contributions only.
  • The interest is less than the balance × 8.25%. Contributions made during the year earn only for the months after they arrive, so the year's interest is less than the closing balance × rate.
  • Your employer's share looks small. The EPS part (up to ₹2,083 a month) is not in your EPF passbook; it is in the pension scheme.
  • The calculator's balance differs from the passbook. The calculator assumes the same basic all year and a raise each April. Arrears, a mid-year raise or a missed month change the real figure.

Questions people ask

What is the PF interest rate now?

The PF Calculator uses 8.25% a year, the rate EPFO's Central Board of Trustees recommended for 2025-26, the same as for 2024-25, applying from 1 April 2025. EPFO fixes one rate for each financial year, usually announced between February and March, and the Ministry of Finance ratifies it. Change the rate in the calculator to test another.

How is interest on PF calculated every month?

EPFO works interest out each month on the balance at the start of that month, at the yearly rate divided by 12, and credits the year's total once, in March. A contribution earns from the month after it is paid. On ₹5,117 a month and no opening balance, the first year's interest at 8.25% is ₹2,322.

How much interest will I get on ₹1 lakh in PF?

A balance of ₹1,00,000 at the start of the year earns 1,00,000 × 8.25% = ₹8,250 over the year, credited in March. Contributions you add during the year earn extra, but only for the months after they arrive. The PF Calculator adds both, with an opening balance field under More options.

Does the employer's contribution earn PF interest?

The part that reaches your EPF account does. Of the employer's 12%, 8.33% of wages up to ₹25,000, at most ₹2,083 a month, goes to the Employees' Pension Scheme and earns no PF interest. On ₹30,000 basic, ₹1,517 of the employer's ₹3,600 goes to EPF and earns interest with your own ₹3,600.

Is PF interest taxable?

Interest on employee contributions above a yearly limit is taxable, and withdrawals before 5 years of continuous service can be taxed. Most other EPF interest and the final balance are tax-free. The PF Calculator shows figures before any tax. Confirm the current rules for your tax year with the Income Tax Department before relying on them.

Sources

Checked 18 Oct 2026:

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