EPF

The Employees’ Provident Fund (EPF) Scheme, 1952

The Employee Provident Fund Scheme India was enacted in the year 1952, replacing the Employee Provident Fund Ordinance, 1951. The EPF scheme is now known as the Employees’ Provident Fund and Miscellaneous Act, 1952.

The administration of the Act is carried out by the Central Board of Trustees which comprises representatives of three parties viz. the government, employers and employees. The Board is assisted by the Employees’ Provident Fund Organisation (EPFO) which falls under the purview of the Government through the Ministry of Labour and Employment.

Employee Provident Fund is a very important tool of retirement planning. The tax free interest (compounding) and the maturity ensures a good growth of your money. If continued for a very long term, it can help immensely in meeting ones retirement goal. But while fulfilling other goals or during emergencies, we fall short of funds even after taking all recourse and do force borrowing. At this moment EPF can be helpful due to certain benefits it provides which most of us are unaware of.

PF Entitles for Pension too. There are two elements in EPF- Provident Fund and EPS or Employee Pension Scheme introduced in 1995. The entire contribution of subscriber (12% of basic +DA) goes towards provident fund but from the employer contribution of 12%, 8.33% goes towards EPS (subject to max. Rs 541) and rest added to your provident fund account. The pension on retirement is linked to the number of years in service and the average salary drawn in the year before retirement. This contribution in EPS helps in building a corpus for your pension.

For receiving pension benefits one should be 58 years of age and should have completed 10 years of service without any withdrawal. But there are provisions where if you retire before 58 you will still receive the pension but a reduced amount. Lastly, your family is entitled to the pension if you do not survive the required period, provided they meet some specified conditions.

EPF Membership - Eligibility

Benefits of PF

Provident fund, or employee provident fund for that matter, is a scheme available to salary employees. Popularly known as a retirement benefit, employees are deducted 12% from their salaries which is then added to the kitty. In most cases, the government decides on the amount that employees contribute each month.

• Low risk investment: Provident fund is a good investment since it is sponsored by the government. Each month, you contribute a small percentage on your earnings (normally 12 percent of the basic pay) to the fund. However, the percentage usually varies from one company to the other, but most companies deduct 12%.
• Income tax earnings: The total amount you have contributed, the amount invested by your company as your retirement benefit is tax-free. There is not tax whatsoever on provident fund withdrawn after retirement, which means you get to enjoy your fruitful gains while pursuing new opportunities in your leisure time.
• Savings plan: Provident fund is an ideal saving plan for employees as it provides a taxable-free income at retirement. The best thing is that eligible family members can have access to the funds in the event of a disability, retirement or death.
• Employers retain valuable employees: Employers also use the fund to retain valuable employees, and their contributions help to reduce company’s total expense as well as corporate taxable income. In addition, the government handles the funds on behalf of the company, thereby alleviate their burden.
• Income generated is tax-free: The main benefit of provident fund is that income generated is exempted from taxation. Nonetheless, this will depend on regulations set by the revenue department, which often vary from time to time depending on certain factors. Although these fund investments bear no risk, investors should do thorough research before making any decisions.
  Retirement protection systems have their share of cons and cons. Some people claim that employees with high mobility tend to evade taxation by swapping employment.
  EPF balance is the amount that is there in your EPF Account. EPF balance consists of amount deducted every month from your salary plus the amount that is contributed to your EPF account by your employer. Knowing your EPF balance can be a good indicator of your retirement savings.
  Employee’s Provident Fund, in the year 2013, launched an online enquiry platform for fund balance. The idea behind the move was to give employees quick access to information related to their PF account balance. EPF is an important part of the remuneration structure of any salaried employee. Checking on EPF can give you valuable insights into the status of your PF account especially for instances when you wish to partially withdraw your PF amount or in case you wish to avail a loan against your EPF.