If money is withdrawn from PF midway, will the interest stop? You will be shocked to know this truth!

EPF is a long-term savings scheme, in which both the employee and the employer contribute every month. The government gives a fixed interest rate every year on this deposit amount. But sometimes when needed, people withdraw money from PF even in the middle of the year. In such a situation, the biggest question in the minds of many people is whether the interest will be reduced? Will I get interest for the whole year? Or does the interest stop from the date of withdrawal?

How is interest calculated?

Actually the interest calculation of EPFO ​​is quite easy, you just need to understand it. Interest in EPF is declared annually, but the calculation is monthly. EPFO declares interest at the end of every financial year. But its calculation is done on the end balance of every month. At present the interest rate for EPFO ​​is 8.25%. That is, the interest for that month is calculated on the balance shown on the last date of every month. When the year is over, the interest for all the months is added and deposited together.

How is interest calculated on withdrawal of money?

If you have withdrawn money from PF in any month, EPFO ​​starts calculating your new balance from the same month. Suppose you have withdrawn money in September, then further interest will be decided on the end balance of September. This means that you will get full interest on all the months before withdrawal and further interest will be given on the balance left after withdrawal. That is, the interest does not end on the date of withdrawal, the balance simply reduces and a new basis is formed. Therefore, withdrawing money from PF midway does not stop the interest, rather the calculation starts in a new way on the amount remaining in your account.

Understand with an easy example

Suppose you had Rs 2 lakh in your PF till April, you withdrew Rs 50,000 in August. So now the calculation of interest will be like this – from April to July, interest will be calculated on Rs 2 lakh and at the end of the month of August, the balance will be Rs 1.5 lakh, and the interest for the subsequent months will be charged on this. In this way your interest does not reduce, only the total amount may reduce slightly due to decrease in balance.