Payroll & statutory · Updated September 2026
The Employees’ Provident Fund is a compulsory retirement savings pool: a slice of your pay goes in every month, your employer adds a matching slice, and the balance earns interest set once a year by the government. It runs under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and is administered by the EPFO. For most salaried employees in India it is the single largest forced saving they will ever do, and also the line on the payslip people understand the least.
EPF coverage is mandatory for establishments employing 20 or more people, and for a handful of notified classes below that threshold. Within a covered establishment, an employee earning Basic + DA of Rs 15,000 or less a month must be enrolled. Someone joining above Rs 15,000 who has never held an EPF account can be treated as an excluded employee, but in practice most employers enrol everyone, either on full Basic + DA or capped at the Rs 15,000 statutory wage.
You contribute 12% of Basic + DA. Your employer also contributes 12%, but its share is split: 8.33% of wages, capped at 8.33% of Rs 15,000, goes to the Employees’ Pension Scheme, and whatever is left of the 12% goes into EPF. A reduced rate of 10% applies to a few categories, such as establishments with fewer than 20 employees and certain sick or loss-making units.
Take Basic + DA of Rs 30,000:
| Component | Rate | Amount / month |
|---|---|---|
| Your contribution (to EPF) | 12% | Rs 3,600 |
| Employer to EPS | 8.33% of Rs 15,000 | Rs 1,250 |
| Employer to EPF | 12% minus EPS share | Rs 2,350 |
| Going into your EPF each month | Rs 5,950 |
On top of that, the employer pays a small EPF administrative charge (0.5% of wages, subject to a monthly minimum). The PF Calculator works all of this out both ways, on full wages and on the capped wage.
The EPFO declares an interest rate each financial year; it was 8.25% for FY 2024-25. Interest is calculated monthly on the running balance and credited once a year. Because the rate is reviewed annually, treat any figure you have seen as indicative rather than fixed.
The employer’s 12% is a real cost, so it is almost always shown inside CTC. That is why your take-home is noticeably lower than your CTC divided by 12: both your PF and the employer’s PF are sitting in your retirement account, not your bank account. The CTC to In-Hand Salary Calculator shows the gap explicitly.
When you change jobs, your UAN stays the same and you should transfer the old EPF balance to the new account rather than withdraw it; withdrawing before five years of continuous service makes the amount taxable and resets the clock on the tax-free status. Since April 2021, interest on your own contributions above Rs 2.5 lakh in a year is taxable, which mainly affects high earners and heavy VPF users. And contributions must reach the EPFO by the 15th of the following month through the monthly ECR filing; late deposits carry damages and interest, and a good payroll system exists largely to make sure that date is never missed.
On Basic + DA (plus retaining allowance, if any), not gross and not full CTC. This is also why a salary structure with a very low basic produces a smaller PF corpus over time.
Only if you were never an EPF member and your Basic + DA at the time of joining is above Rs 15,000. Once you are a member, you stay in for as long as you are in covered employment.
EPF is a lump-sum savings balance you can withdraw or transfer. EPS is a pension: part of the employer’s contribution funds a monthly pension payable after 58, provided you complete at least 10 years of pensionable service.
For how the employer-side numbers roll into a full salary structure, use the Salary Breakup Calculator, and if you are choosing a system to run all of this, our greytHR vs Zoho People comparison covers how each handles PF filing.