Employees provident Fund (EPF) is a profitable retirement scheme which is available for employees earning their income through salaries. The Employees Provident Fund Organisation of India (EPFO) who maintains and supervises Provident Funds states that every company that has more than 20 employees must register with EPFO.
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EPF is a savings policy which allows an employee to save a percentage of his/her salary every month. The funds accumulated from EPF saving can later be used on events when an individual is unable to work due to unavoidable reasons or upon retirement.
PF Deduction from the Salary
PF Deduction is defined as a saving policy where 12% of the Basic Salary of an employee and an additional 12% of Basic Salary contributed from the employer’s side are deposited in the employee’s PF account. The whole of your 12% contribution goes into the EPF account, with that 3.67% of the employer’s contribution also goes into EPF account and the remaining balance i.e. 8.33% goes into your EPS (Employee’s Pension Scheme). PF funds also generate an interest of 8% - 12%, depending on the rate assigned as per the government and the Central Board of Trustees.
When an employee joins a new company then it is important that the employee provides his/her EPF number to the new employer and make sure that EPF details are updated as per the new company’s credentials.
How does one earn interest through Employee Provident Fund?
The government and the Central Board of Trustees decide upon a rate of compound interest which is paid every year on the 1st of April and credited to the provident fund of the employee.
EPF contributions from employee’s salary are made monthly, but the interest is calculated on a yearly basis. For instance; At the beginning of every year an employee will have an opening balance (the total PF balance collected till that point) and the opening balance for the next year would be calculated as such; opening balance + total monthly contributions + interest (old opening balance + contribution).
The interest will, however, be earned only from an employee’s EPF balance and not from the EPS which is the Employee Pension Scheme (8.33% of the total 12% contribution made from employer’s end).
Tax Benefits of EPF Scheme
The part of the employer’s contribution to your EPF is tax-free while a percentage of tax is deductible from an employee’s PF contribution, under Section 80C of the Income Tax Act. The interest earned and the withdrawn money upon attaining the mandatory specified period of 5 years are exempted from Income Taxation.
What are the eligible grounds for PF withdrawal?
EPF withdrawals are generally not permitted unless the individual has resigned from the company. Only after 2 months from the date of resignation, an individual can apply for PF withdrawal.
Forms required for EPF withdrawal
- Aadhar card copy.
- Pan card copy.
- Signed canceled Cheque (Only Employee name should appear on the cheque leaf).
- 2 Revenue Stamp
- Form 10C
- Form 19
- Form 15G
- Joint Declaration Form
After filing all the required documentation, the applicant must courier the contents and address it to the Headquarter Office of his/her former employer. The forms are then verified and transferred to the EPFO where the final authorization for the EPF withdrawal proceeds.
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How to View the balance of your Employees Provident Fund
Before the introduction of EPFO’s member portal and UAN, members could check their EPF balance to verify contributions made and their outstanding balance only once every year. Now, through EPFO, checking one’s PF balance can be easily done online.
Steps to check EPF balance on EPFO’s member portal
- Go to EPFO’s member portal.
- Click on ‘Know your balance’ at the bottom of the page.
- Select the location of your regional EPF office.
- Enter your PF account number, your name as it appears in EPF and your mobile number.
- Click submit and in a few seconds, you will receive a text message in your registered number, with details of your EPF balance.
Frequently Asked Questions
Q. Can an employee opt out from making Provident Fund contributions?
An employee cannot opt out of paying a percentage of his/her salary into the PF account if he/she have contributed to the EPF account even once within his/her career life. The only way to opt out from EPF deduction is at the start of one’s career. The applicant should file Form 11 and sent an official confirmation to the employer, stating that he/she does not want to be enrolled in the EPF Scheme.
Q. What are the benefits of EPF contributions?
Although opting out of the EPF scheme will increase your in-hand salary at that time, enrolling in EPF scheme is the simplest way to set up a retirement fund. The contribution made from your end and the employer’s end towards your EPF account along with the interest percentage earned from the balance results in a strong fund collection.
Q. How can an individual obtain details of one’s PF balance status?
For every registered account, EPF details will be available on the official EPF India website. Through UAN (Universal Account Number), these days one can easily access all EPFO facilities online.