How to Calculate PF?
If you’ve ever found some deductions on your salary on account of PF contributions, you’ll be wondering about how to calculate PF. According to the Employees Provident Fund Act of 1952, any organization that employs more than 20 employees comes under the purview of the Employee Provident Fund Act 1952. A PF account is also compulsory for people who are drawing a salary of less than Rs 6500 a month.
- The calculation is very simple, and it depends on the different components of your salary. If your salary has different components or parts like basic, DA, employee retention allowance etc, the PF would be calculated as 10% of all the 3 components mentioned above.
- The employer would also contribute an equal amount that has been calculated to your PF account.
- In case your salary has just a basic component, i.e. no DA or employee retention allowances are present as a part of your salary, a total of 12% would be deducted from the basic. This would be your contribution to your PF. Of course, the employer would pay a similar amount to your PF account also. The government would pay the fixed rate of interest on your account- and you would be eligible for tax deductions under section 80c of the income tax act.
Your employer is supposed to provide you annual or at least periodic statements about the deposits being made to your account. In case you find a deviation in your accounts, you should immediately verify the details and raise a complaint.
How to Calculate PF Withdrawal Amount
You can withdraw up to 90% of the amount in your account if you are 54 years of age or above. Additionally, you may also withdraw the amount if you have retired before that age. If you are withdrawing the amount before 5 years of service, you will need to pay a tax on the amount.
How to Calculate PF Interest
The current rate of interest PF is 9.5%. It is calculated on both your contributions. Now that you know how to calculate PF and the interest you earn on it- you’ll be better able to plan your retirement interests and savings.
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