All You Need to Know About the Employees Provident Fund

Before we go into what the Employee Provident Fund is, let us look at a few abbreviations you’ll come across and their full form:

 

  • EPF – Employees’ Provident Fund
  • EPFO – Employees’ Provident Fund Organisation
  • EPS – Employee Pension Scheme

What is EPF?

You might remember your EPF to be that sum of money that gets deducted from your salary every month. Now let’s get into detail about what EPF is and why has it been put in place by the government.

 

The Employees’ Provident Fund (EPF) is a savings mechanism designed for all working individuals It is a scheme managed by the Employees’ Provident Fund Organisation (EPFO) under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

 

Now you should know that there are 2 types of provident funds; Statutory Provident Fund and Recognized Provident Fund

 

A statutory provident fund is for government and semi-government employees like your railway officers. Whereas a recognized provident fund is a fund which is recognized under Employee Provident Fund and Miscellaneous Provisions (EPF & MP) Act 1952. The recognized provident fund is further classified into a) Government managed fund and b) Private trusts managed by the organizations.

 

Employee Provident Fund

Contributions to this fund is made by both the employee and the employer every month. This works as a long-term saving plan for retirement. An employee will contribute 12% of the specified salary (either Rs. 6,500 or your actual Basic if it is higher – whichever you choose) and your employer will contribute 3.67% of the specified salary (either Rs. 6,500 or the actual Basic, whichever is higher, if he so chooses)

Employee Pension Scheme (EPS)

An employee will not need to make contributions to his or her Pension Scheme.Your employer contributes 8.33% of Rs. 6,500 basic salary to the EPF Scheme and the 1.16 is contributed by the Central Government. The objective of this scheme is to provide regular monthly pension to an employee after retirement.

Employee Deposit Linked Insurance (EDLI)

Introduced in 1976, this scheme was set up with an objective to provide life insurance cover to all members of the Employee Provident Fund. The insurance amount is linked to the balance in the employee’s PF account with a maximum cover of Rs. 60000/- at any time. Contributions to this scheme are made by the employer, which is 0.5% of Rs.6500/-

 

All establishments that employ 20 or more people will need to make contributions towards the provident fund of those employees.

 

EPF Interest:

You’d be glad to know that you also earn interest on contributions made to your employee provident fund. The interest rate is decided by the government and central board of trustees and added into the EPF scheme on a yearly basis.

 

Tax:

Tax is not levied on both yours and your employers’ contribution to the EPF scheme. Withdrawal of PF after the required period of 5 years is also Tax-free.

EPF Withdrawal:

Withdrawals are not allowed from your PF unless you have attained the age of 58. However, there are provisions where you can withdraw your PF early if you require it for any of the following reasons; education, marriage, medical emergencies, purchasing land, constructing a house, making repairs to your existing home. Partial withdrawals of up to 50% is also allowed.

EPF Balance:

Now that you know everything there is about your Employee Provident Fund, we’re sure you would also like to know how to check your EPF balance. All you need to do is visit the EPFO member portal and check your balance online with your UAN number. Further, if you have any grievance relating to your employee provident fund scheme, you can log onto the EPFO portal and register your issue.

 

As you have now realized, that your PF is more than just a monthly amount that gets deducted from your salary, instead it works as a savings plan that helps safeguard your future.