The Employees' Provident Fund (EPF) interest is calculated on the contributions made by the employee as well as the employer. Contributions made by the employee and the employer equals 12% or 10% (includes EPS and EDLI) of his/her basic pay plus dearness allowance (DA).
To incentivize women employment in the formal sector and augment their take-home salary, the Government of India in Budget 2018, reduced women employees' contribution to 8% for the first 3 years of their employment as against the current 12% or 10% depending on the type of establishment. The employer contribution will, however, remain at 12%/10%.
What's more, for new employees coming under the ambit of EPFO, the employer will not be required to make any contributions. Instead, the Government will make the employer contribution of 12% (EPF and EPS both) for the first three years of employment. The terminal date of registration of beneficiary through an establishment is March 31, 2019. EPF Contribution for employees who have joined on or after 1st April 2016 with a salary up to Rs 15000 per month will also be covered under this scheme.
The Contributions are made on a wage ceiling (Basic Salary + DA) of Rs 15,000. However, when the current income exceeds the wage ceiling, three standard methods are employed for calculating the contribution amount. The employer is free to use any one of the methods.
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