Every year, the Employees' Provident Fund Organisation (EPFO) reviews and fixes the interest rate that applies to your EPF savings. This rate determines how much return you get on the money you and your employer contribute each month.
For the financial year (FY) 2025-26, the interest rate has been kept at 8.25% which is at the same level for the third consecutive year.
1. EPF Interest Rate for FY 2025–26
Every year, the EPFO's Central Board of Trustees meets to recommend an interest rate for the upcoming financial year. This recommendation is then approved by the Ministry of Finance before it becomes official. For FY 2025-26, the board has maintained the rate at 8.25% per annum unchanged from the previous two years.
Why does this matter?
At 8.25%, EPF consistently outperforms most traditional savings instruments such as bank fixed deposits and PPF (which currently offers 7.1%), making it one of the highest-yielding government-backed savings schemes for salaried employees in India.
Every year, EPFO's Central Board of Trustees meets to recommend an interest rate for the upcoming financial year. This recommendation is then approved by the Ministry of Finance before it becomes official. For FY 2025-26, the board has maintained the rate at 8.25% per annum - unchanged from the previous two years.
Why does this matter?
At 8.25%, EPF consistently outperforms most traditional savings instruments such as bank fixed deposits and PPF (which currently offers 7.1%), making it one of the highest-yielding government-backed savings schemes for salaried employees in India.
2. How Is EPF Interest Calculated?
EPF interest calculation is straightforward once you understand the two-step process: EPFO computes interest on your monthly closing balance, then aggregates the total and credits it to your account at the end of the financial year.
The Formula
Monthly Interest = Monthly Closing Balance × (Annual Rate ÷ 12)
For FY 2025–26 (8.25% p.a.):
Monthly Rate = 8.25% ÷ 12 = 0.6875% per month
Annual Interest = Sum of all 12 monthly interest amounts
A Simple Example
Interest is calculated month by month through March 2026 like this, then the full year's total is credited to your passbook typically between July and September 2026 (see Section 3 above).
What Counts Towards Your Balance?
Your EPF balance includes contributions from both you and your employer. Typically:
- Employee contribution: 12% of basic salary + dearness allowance
- Employer contribution: 3.67% goes to EPF; the remaining 8.33% goes to EPS (Employees' Pension Scheme)
Note: You do not earn interest on your pension (EPS) share.
3. When Is EPF Interest Credited to Your Account?
There is often confusion about when EPF interest actually shows up in your passbook. Here's how it works:
- Monthly calculation: EPFO calculates notional interest on your closing balance at the end of each month, throughout the financial year (April to March).
- Annual crediting: The accumulated interest for the entire year is credited in one lump sum after the financial year closes which is typically between July and September.
- Passbook update: Your UAN passbook may not immediately reflect the credit. If you don't see the interest by October, check again or contact your regional EPFO office.
Don't Panic If Your Passbook Doesn't Update The passbook update can lag by several months after year-end. You are not losing any interest and it is simply being processed. The interest is backdated to the end of the financial year regardless of when it appears in your passbook.
4. EPF Interest Rate History (FY 2016–17 to 2025–26)
Understanding the history of EPF interest rates helps you appreciate how your provident fund has grown over the years and gives context to the current 8.25% rate.
Key Insight Despite some fluctuations, the EPF interest rate has stayed above 8% every year for the past decade. In contrast, bank fixed deposit rates during the same period ranged between 5.5% and 7.5% for most tenures. EPF's compounding advantage adds up significantly over a 25–30 year career.
5. Is EPF Interest Taxable?
For most salaried employees, EPF interest remains completely tax-free. However, a change introduced in the Union Budget 2021 made interest on higher contributions taxable. Here's what you need to know:
The Current Tax Rule (from FY 2021–22 onwards)
- Annual EPF contribution up to ₹2.5 lakh: tax-free
- Above ₹2.5 lakh (for employees without employer contribution to NPS): interest on the excess amount is taxable as per your income slab
- Above ₹5 lakh (for government employees where the employer also contributes to NPS): interest on the excess amount is taxable
See our Budget 2026 EPF tax changes guide for how the new ₹7.5 lakh employer contribution ceiling affects this calculation.
Who Is Affected? This rule primarily impacts high-income earners and those who make Voluntary Provident Fund (VPF) contributions. If your monthly basic salary is below ₹1.73 lakh, your mandatory 12% contribution will keep you well within the ₹2.5 lakh annual threshold. For most salaried employees, EPF interest remains entirely tax-free.
Section 80C Deduction
Your EPF contributions (employee's share) qualify for tax deduction under Section 80C, up to the overall limit of ₹1.5 lakh per year. This makes EPF doubly tax-efficient: you save tax on contributions going in, and for most people, interest accumulates tax-free.
6. EPF Withdrawal: Updated Rules, Conditions & Tax Treatment (EPF Scheme, 2026)
Updated as of the EPF Scheme, 2026 (effective June 29, 2026). The withdrawal categories below replace the older, separate rules for home purchase, home loan, renovation, medical, marriage, and education.
Understanding EPF withdrawal rules helps you make informed decisions and avoid unnecessary tax or penalties. There are two categories: full withdrawal and partial withdrawal.
Full EPF Withdrawal
You can withdraw your entire EPF balance in the following situations:
- Retirement: at age 58 or above (full withdrawal permitted)
- Unemployment: you can withdraw 75% of your balance soon after job loss, and the remaining 25% after 12 months of continued unemployment
- Permanent migration abroad (NRI): you can withdraw the full balance upon permanently leaving India
- Permanent disability or inability to work
Partial EPF Withdrawal (Advance)
EPFO now groups all partial withdrawal reasons into two simplified categories, both requiring the same minimum service period:
Essential Needs (covers medical treatment, marriage, and education)
- Eligibility: minimum 12 months of service
- Maximum amount: up to 100% of your eligible balance (at least 25% of your total PF must remain in the account)
- Covers: medical treatment for self/spouse/children/parents, marriage of self/children/siblings, and education of self/children
Housing Needs (covers land purchase, house construction, home loan repayment, and renovation)
- Eligibility: minimum 12 months of service
- Maximum amount: up to 100% of your eligible balance (at least 25% of your total PF must remain in the account)
Want the full breakdown of every withdrawal category, timelines, and how the 25% lock-in works? See our complete guide to the EPF Scheme, 2026 withdrawal rules.
Is EPF Withdrawal Taxable?
After 5 years of continuous service:
- Tax-free: withdrawal is entirely tax-free, including both principal and interest.
Before 5 years of continuous service:
- Taxable: the withdrawn amount is added to your income and taxed as per your income tax slab.
- TDS deduction: TDS is deducted at 10% (with PAN) or 34.608% (without PAN) on withdrawals above ₹50,000 unless you submit Form 121 (which has replaced the old Form 15G/15H) declaring that your total income for the year is below the taxable limit.
Partial withdrawals:
- Not taxable: partial withdrawals for approved reasons such as medical treatment, education, marriage, or housing are not taxable, even if service duration is less than 5 years.
For the full Form 121 process, see our Form 121 guide.
Want to know exactly how much of your PF you can withdraw under the new rules? Check your withdrawal eligibility free with CheckMyPF →
7. The Big Myth: Does EPF Interest Stop After 3 Years of No Contributions?
The short answer: No. For resident Indians, EPF interest continues to accrue until you turn 58, regardless of how long your account has been inactive. EPFO has confirmed this on multiple occasions, including clarifications issued in March 2016 and July 2017. Your account only becomes truly inoperative at age 58.
We've covered this myth, along with the official EPFO clarifications behind it, in a dedicated article. The rule is different for NRIs (see below).
8. EPF for NRIs & International Workers
The rules for NRIs and international workers differ meaningfully from those for resident Indians, particularly around how long interest continues to accrue after contributions stop.
How Long Does EPF Interest Continue for NRIs?
- NRI after 3 years: once the EPF account becomes inoperative (36 months after the last contribution), interest stops. Your balance is frozen at that point until withdrawal.
- What to do: if you are an NRI and do not plan to return to India, withdraw your EPF balance within 3 years of your last contribution to avoid losing interest unnecessarily.
Key Difference from Resident Indians For resident Indians, EPF interest continues until age 58, even without contributions. For NRIs, once you stop contributing, your EPF account earns interest for up to 3 years from the date of your last contribution. After 36 months of no contributions, the account is marked inoperative and interest stops accruing. This makes timely action critical for NRIs.
Your Two Options as an NRI
- Withdraw immediately: NRIs permanently relocating abroad can withdraw the full EPF balance without any waiting period. You do not need to wait 2 months as resident Indians do.
- Leave it for up to 3 years: if you are temporarily abroad and plan to return to India, you can leave the balance untouched. It will earn interest for up to 36 months from your last contribution. Upon returning, you can transfer it to your new employer's EPF account via your UAN.
- Transfer to an SSA country: if you're relocating to a Social Security Agreement (SSA) country, you can transfer your EPF service history to continue benefiting from your contributions under the agreement between India and that country.
Tax Treatment for NRIs on EPF Withdrawal
- If you have completed 5 years of continuous service, your EPF withdrawal is tax-free in India.
- If withdrawn before 5 years, TDS applies at 34.608% without PAN (or 10% with PAN) - the same TDS structure that applies to resident Indians.
- The actual tax liability may be reduced under a Double Taxation Avoidance Agreement (DTAA) between India and your country of residence (applicable for countries like the UAE, USA, UK, Singapore, and Germany, among others).
- NRIs should consult a tax advisor familiar with both Indian and their home country's tax laws before withdrawing.
See our NRI PF withdrawal guide for the full step-by-step process.
For International Workers (IWs), citizens of countries that have signed a Social Security Agreement (SSA) with India, including Germany, Japan, South Korea, France, and Belgium, may be eligible to transfer their EPF balance to their home country's social security system or claim a Certificate of Coverage. India's SSA network is expanding, so check with EPFO or a qualified advisor for your specific country.
9. Why EPF Remains One of India's Best Long-Term Savings Tools
- Stable Returns - 8.25% p.a., consistently higher than FDs and most debt instruments
- Compound Growth - monthly calculation + annual compounding builds serious long-term wealth
- Government Backed - managed by EPFO under the Ministry of Labour, fully sovereign-backed
- Tax Benefits - 80C deduction on contributions; interest tax-free for most employees
- Employer Match - your employer contributes too, effectively doubling a portion of your savings
- Portable — your UAN links your PF across employers for easy transfer when switching jobs
Take Control of Your EPF Journey
At FinRight, we help you simplify complex PF-related processes. From interest tracking to claim assistance and the new EPF Scheme, 2026 withdrawal categories, we provide personalised support to make sure your PF withdrawals are smooth and hassle-free.
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