PF Contribution Explained: Employee, Employer, EPF and EPS

The PF wage ceiling was raised from ₹15,000 to ₹25,000 a month with effect from 17 September 2026 (notification S.O. 5109(E)). Contributions are mandatory on PF wages up to ₹25,000, and the maximum employer contribution to EPS rises from ₹1,250 to ₹2,083 a month. For September 2026 payroll, wages up to 16 September use the old ₹15,000 ceiling and wages from 17 September use the new one. Many employers contribute on the full basic instead, which raises your savings but lowers in-hand salary. Your payslip or HR team can tell you which applies.

EPFO declares an interest rate each financial year and calculates interest on your monthly running balance, crediting it once a year. The PF Calculator is pre-filled with 8.25% (declared for FY 2025-26) and projects your balance over the years.

Check any salary with the PF Calculator. If your payslip shows different figures, your employer may be using full basic, a different wage definition or the old ceiling for part of September 2026.

Over 20 years, interest overtakes contributions — the effect of compounding. The rate is declared every year, so real balances will differ.

The 8.33% of wages that goes to the Employees' Pension Scheme doesn't earn interest in your name and isn't shown as part of your EPF balance. It funds a monthly pension from age 58 based on your pensionable salary and years of service, subject to the scheme's rules and minimum service conditions. Your EPF passbook shows the EPS contribution separately.

You can ask your employer to deduct more than 12% as Voluntary Provident Fund. It earns the same EPF interest rate, but the employer doesn't have to match it. Keep in mind that interest on employee contributions above ₹2.5 lakh a year (₹5 lakh where there is no employer contribution) is taxable.

1. Activate your UAN on the EPFO member portal and link it to Aadhaar and your bank account.
2. Download the passbook every few months and check that each month's employee and employer shares were credited.
3. When you change jobs, make sure your old PF balance is transferred to the same UAN.
4. Raise any mismatch with HR first, then through the EPFO grievance portal if needed.

EPF is meant for retirement, but partial withdrawals are allowed for specified purposes such as medical treatment, education, marriage and housing, subject to service conditions and limits. The full balance can be withdrawn on retirement or after a period of unemployment. Withdrawals before five years of continuous service may be taxable. Check the current rules on the EPFO portal before applying.

Establishments with 20 or more employees must register with EPFO and contribute for eligible employees; smaller ones can join voluntarily. Employees with PF wages up to the wage ceiling must be enrolled. Those who join with wages above the ceiling may, in some cases, opt out at joining — but once you're a member, contributions continue even as your salary grows.

Besides the 12% contribution, employers pay a small percentage for the Employees' Deposit Linked Insurance (EDLI) scheme, which provides life cover to members, and administrative charges. These are not deducted from your salary.

EPFO calculates interest on the balance at the end of each month and credits it once a year. With ₹3,917 added every month for a year and no opening balance, the monthly balances run from ₹3,917 to ₹47,004. Interest = sum of monthly balances × annual rate ÷ 12:

So the first-year balance is about ₹49,104. The PF Calculator repeats this for every year, with salary increases if you add them.

The passbook on the EPFO member portal shows one row for each month's contribution, usually with three amounts:

• Employee share: your 12%, deducted from salary.
• Employer share: the part of the employer's 12% that goes to EPF.
• Pension contribution: the employer's 8.33% (up to the ceiling) that goes to EPS.

Interest appears as a separate entry once a year, after EPFO declares the rate. If a month is missing or the amounts don't match your payslip, ask HR for the challan details — contributions are sometimes deposited late.

Contributions are due on wages as defined for PF — basic, DA and certain retaining allowances. Statutory bonus and HRA are excluded. Arrears of basic salary paid later generally attract PF for the months they relate to. Under the labour codes, the uniform definition of wages can bring part of large allowances into the PF base.