How to calculate Provident fund ?

Posted on 25th Jul 2018 | 1302 views

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Provident fund calculation

The employer and employee contribute 12% towards PF. 12% of employee basic salary (plus dearness allowances, if any) into employee EPF account. It’s important to note that if employee basic pay is above Rs. 6,500 per month, employee employer can only contribute 8.33% of 6,500 (i.e. Rs. 541) to employee EPS and the balance goes into employee EPF account.

These funds are pooled together from many employees and invested by a trust. This generates an interest of 8% - 12%, which is decided by the government and the central board of trustees. The annual interest rate is currently at 8.75%.

Pf calculation in India

There are two types of the contributions done both employee and employer towards provident fund

Are known as following

EE Amount and ER Amount

EE Amount is The Employee Contribution i.e. employee total contribution in the EPF account. The sum total of PF amount contributed towards PF monthly from employee’s salary.

ER Amount is the Employer Contribution i.e. establishment contributionin which employee work. It is the total of PF amount monthly contributed into employee EPF account by the employer.

Employees contribute 12% from their salary/ wage towards the EPS. This may differ in case of ER amount because employer contribution share is divided

Calculation of provident fund

To understand the methodology used in the EPF calculator, take the following case:

1. Basic salary of employees + DA: 50000 rupees

2. Employee's contribution to the EPF: 12% * 50000 = Rs 6000

3. Employer's contribution to the EPF = 3.67% of 50000 = 3.67% * 50000 = Rs 1835

4. Employer's contribution to the Employees Retirement Plan (ESP): 8.33% * 50000 = Rs 4165.... (I)

5. Employer's contribution to the EPF at the income threshold of 15,000 rupees: 8.33% of 15,000 = Rs 1249, 50

6. Employer contribution higher than earnings per share above threshold (I) - (II): Rs 4165 - Rs 1249, 50 = Rs 2915, 50

7. The excess of (B) is added to the employer's contribution to the EPF at (A) = 2915.50 + 1835 = Rs 4750.50

Provident fund calculation formula

Percentages are calculated on (Basic Salary + DA)

Employee contribution: (12 %)

Employer Contribution ( 12 % + 1.61 %)

1] 12 % Bifurcation

8.33 % pension fund

3.67 % Provident fund

Total 12 %

2] 1.61 % Bifurcation

Account 21: 0.5 % of (Basic+ DA) is paid by the employer towards EDLI Insurance Charges.

Account 22: 0.01 % of (Basic+ DA) is paid by the employer towards EDLI Admin Charges.

Account 2: 1.1 % % of (Basic+ DA) is paid by the employer towards EPF Charges.

Provident fund formula

PF deduction=Adding EE amount + ER amount

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