NEW DELHI: As recommended by the retirement fund body's Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) which is chaired by Union Labour and Employment Minister Bhupender Yadav in March this year, the Union government on Monday notified 8.15 per cent as the interest rate on deposits under the Employees' Provident Fund (EPF) scheme for financial years 2022-23. 

At 8.15 per cent, the interest rate for EPF contributions for FY23 is just a tad higher than the multi-decadal low 8.1 per cent interest rate for FY22. Normally as a practice, the interest rate is notified by the finance ministry in the first quarter of the fiscal and subscribers were waiting for the notification for FY23.

In March 2022, EPFO reduced the interest rate on EPF deposits for 2021-22 to a four-decade low of 8.10 per cent from 8.5 per cent in 2020-21. This was the lowest since 1977-78 when the EPF interest rate stood at 8 per cent.

The EPF in India, commonly also known as the Provident Fund (PF), is essentially a retirement savings fund, in which both employers and workers contribute to the employee's post-employment life, and is governed by The Employees' Provident Funds Act 1952, which makes it mandatory for employers with a minimum of 20 employees to have EPF accounts for their workers and make monthly contributions. 

Since the fund is managed by the government the EPF offers a guaranteed return as per the interest rate for the EPF scheme set by the EPFO every year, the rate however varies annually and depends on several economic factors. 

As far as the interest on the EPF contribution by the employees and the employers, it is calculated monthly, and the accumulated interest is deposited into the EPF account at the end of the financial year. After the first month's contribution, the EPF account balance will increase, and it will begin earning monthly interest. The monthly interest amount is calculated based on the EPF balance at the beginning of the month and the applicable interest rate. This process continues throughout the financial year, resulting in a cumulative interest deposit at the year-end.

Employees can use the EPF calculator if they wish to make conscious saving choices about their retirement savings fund and can accurately calculate the retirement corpus for collecting financially comfortable protection for the golden years.