Lesson 1 of 3 · 8 min
24% of your basic pay, and where it lands
You put in 12%, your employer puts in 12%, and the two halves do not land in the same place. One is quietly building a pension you have never seen.
Look at your payslip. There is a line taking 12% of your basic pay plus dearness allowance and calling it provident fund. Your employer matches it with another 12% that never appears as money you were paid.
So 24% of your basic is moving every month, and almost nobody having it taken out can say where the second half goes. It does not all land in the same account, and that split is the single most useful thing to understand about your own salary.
| Who pays | How much | Where it lands |
|---|---|---|
| You | 12% of basic pay plus dearness allowance | All of it into your provident fund balance |
| Your employer | 8.33% of wages, up to the statutory wage ceiling | Into EPS — the pension scheme, not your balance |
| Your employer | Whatever is left of its 12% | Into your provident fund balance, alongside your own |
The four numbers behind the deduction
- Your contribution
- 12% of basic plus DA
- Diverted to the pension scheme
- 8.33% of wages
- Statutory wage ceiling for the pension scheme
- ₹15,000 a month
- Interest rate last declared
- 8.25% for FY 2025-26
Deducted from your pay every month and credited to your provident fund account.
Calculated on wages up to the statutory ceiling of ₹15,000 a month, which works out at ₹1,250 a month.
Earn more than this and the pension slice does not grow with your pay. It stays at ₹1,250 a month.
Declared each year by EPFO and credited after ratification. The rate for the current year is declared later, so this is the last confirmed figure rather than a promise about the future.
Quick check
Your basic pay is ₹40,000 a month. How much of your employer's 12% goes into the pension scheme?
Check yourself
1 / 3
Kabir asks
How much of your basic pay plus dearness allowance goes into provident fund from your side?
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