Employee provident fund or EPF is a simple savings financial scheme launched by the employees’ provident fund & miscellaneous act. This is administered as well as managed by a central board of trustees. This consist of reps from 3 parties, namely, employees, employers, and government. EPFO works under government jurisdiction and is managed and controlled by the Labour and Employment Ministry.
EPF (employee provident fund) naturally aims to promote your savings and allows you to use the same after retirement. EPF or employee provident fund is a collection of funds that is contributed by the employer monthly. Employee and employer contribute 12 per cent each of the employee’s basic salary and dearness allowance to EPF. Such contribution by employer and employee generates a predetermined level of interest fixed by the EPF (employees’ provident fund). The interest amount to receive on deposit along with the overall accumulated amount is completely free from tax i.e., the employee might withdraw the whole fund with zero worries about making payment for any type of tax on this.
The accrued amount might even be withdrawn by the nominee or your legal heir after your demise or withdrawn by you after your resignation. You may conduct your EPFO establishment search on Google to know more about this financial tool. Upon your EPFO establishment search, there are many things you may know about EPF that may encourage you to invest in VPF (voluntary provident fund) too. A voluntary provident fund is a variant of EPF with the only difference here being that you voluntarily can invest any amount in this fund. Read here to be well-versed with its kinds and benefits.
EPF (employee provident fund) scheme –
Insurance scheme or EDLI, 1976
- Benefit of about 20 times the wage. The highest benefit is Rs 6 lakh.
- Benefit offered in the case of an employee death.
EPS or employee pension scheme, 1995
- Minimum pension on the disability
- Service benefit to the participant
- Monthly benefit for retirement, superannuation, survivor, disability, etc.
EPF or employee provident fund, 1952
- Accumulation plus the interest component on death and retirement.
- Partial withdrawal permitted for home construction, education, marriage, and illness.
- Housing scheme available for the EPFO members to meet the prime minister’s goal of providing housing for all by the year 2022.
What are the advantages of the EPF (employee provident fund) scheme?
EPF or employee provident fund is the biggest and largest savings scheme available to you as an Indian employee. The major key advantages of the instrument are –
- It is tax-free in nature – EPF instrument offers a specific interest constituent on deposits at a particular rate that is actually predefined by the government. Both amounts of interest received upon the deposit and the actual amount deposited are deemed tax-free by the Government. Any type of withdrawal, which is done at the maturity or post 5 years completion gets 100 per cent tax exempt. However, if this amount is withdrawn prematurely i.e., within 5 years, then it is not tax-free.
- Long-term security on finances – Funds parked in the account cannot be easily withdrawn without stating a specific reason, hence, this assists in ensuring long-term savings.
- Retirement period – The fund accumulated in the scheme might be utilized at the retirement time of the employee as a monetary security.
- Unseen circumstances – The fund accumulated can even be used by you in the case of any financial exigency. You might select to withdraw your fund prematurely. The instrument allows premature withdrawals only in special cases.
- Income loss or unemployment – If you as an employee lose your present job due to any reason, then you may use these funds to meet your expenses.
- Resignation or quitting the job – After resignation, you are allowed to withdraw 75 per cent of your EPF post 1 month from the date of your resignation. Note that the remaining 25 per cent may be withdrawn by you after two months if you remain unemployed.
- Death – In the scenario of your death, the accumulated amount and your interest earned on the same is provided to your nominee, which helps your family to tide through tough scenarios.
- Disability of employee – If the employee no longer is in a position to join, then funds can be withdrawn to face such tough times.
- Lay off – If you are suddenly asked to resign from your job, this fund might be used by you till you get a suitable job.
- Long-term savings – This option acts as a long-term savings scheme best to meet your retirement expenses.
- Fund liquidity – The scheme serves as a sound income source for you during a financial crisis. This fund may be utilized by you to mitigate your unavoidable expenditures like education needs or medication needs
- Pension scheme – The employer not just contributes to your provident fund but even makes it important to contribute to your employee pension scheme, which later may be used by employees after retirement.
- Insurance scheme – Here, the employer even requires making a specific contribution towards your life insurance. This provides total protection and security to you as an employee.
- Accessible all throughout – With the assistance of the UAN or universal account number, you can simply get accessibility to the provident fund account through the EPF portal. However, to access this portal, you must know your EPFO member login ID and passcode. Without this, it may be difficult for you to access your EPFO account. Using this account, you can simply transfer funds or withdraw the accumulated funds in the scenario of any urgency.
What’s the EPF (employee provident fund) eligibility parameter?
- Employees must become active scheme members to get the benefit of it.
- Any organization that employs over twenty staff members are liable to endow the EPF benefit to all its staff.
- This scheme is not valid to you if you reside in Jammu & Kashmir.
Contribution of employees towards EPF (employee provident fund)
EPF (employee provident fund) is a financial fund wherein both employee as well as employer contribute a portion towards the salary. Such contributions are made on a regular basis monthly. The rate of interest is predetermined and is based on your salary and your dearness allowance. Generally, the employee contribution rate is fixed at 12 per cent.