All About the Employee Provident Fund (PF): Benefits, Eligibility, and More

The modern financial landscape requires safeguarding financial security and stability, which is why the Provident Fund (PF) is integral for the finances of employer and employee alike. It is crucial to comprehend the intricacies of PF and make sound financial decisions. In this EPF guide, let us dive deep into the world of PF and discuss all about EPF or Employees’ Provident Fund.

What is PF?

Since its inception, the Employee Provident Fund (EPF) has been a government-mandated savings scheme that provides Indian employees with financial security during their retirement and security against unforeseen emergencies. EPF requires both the employer and the employee to contribute a specific percentage of the employee’s salary to the funds. Operating under the governance of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, EPF is managed by the Employees’ Provident Fund Organization (EPFO), which falls under the Ministry of Labour and Employment.

What are the Benefits of EPF?

Here’s why, as a working individual and employee, you should invest in EPFO to gain long-term retirement benefits:

 

  • Retirement Savings

EPF serves as a retirement savings scheme, ensuring that employees have a financial cushion when they retire.   

 

  • Financial Security

EPF provides a sense of financial security to employee’s dependents and family members, with the knowledge of a dedicated fund, accessible in times of need. 

  

  • Long-Term Investment

EPF offers a long-term investment opportunity with competitive interest rates.

   

  • Tax Benefits

Contributions made towards EPF are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, resulting in potential tax savings.  

 

  • Life Insurance Coverage

The EPF scheme also provides life insurance coverage through the Employee Deposit Linked Insurance Scheme (EDLI), where beneficiaries are entitled to a lump sum insurance payout.  

 

  • Accessibility and Transparency

With the introduction of online services by the EPFO, employees can easily access their EPF account details, check their balance, and track the status of their claims.  

 

  • Portability

EPF is a portable scheme, which means that if an employee changes jobs, they can transfer their EPF balance from their previous employer to the new one. 

  

  • Employer Contribution

Employers also benefit from EPF as they contribute towards their employees’ future financial well-being.  

All About EPF: Important Points to Consider

Eligibility for EPF 

There are certain metrics for organizations as well as employees, in terms of eligibility. EPF applies to organizations with 20 or more employees, where employees with a basic salary of up to Rs. 15,000 per month are eligible to become members of the EPF scheme. However, employees earning more than the threshold can also join voluntarily, subject to certain conditions.  

Contributions to EPF 

According to the Employee Provident Funds and Miscellaneous Provisions Act, 1952, both the employee and the employer contribute to the EPF scheme monthly. The current contribution rate is 12% of the employee’s basic salary plus dearness allowance. Out of this total contribution, 3.67% goes towards the EPF, while the remaining 8.33% (capped at Rs. 1,250) is allocated to the Employee Pension Scheme (EPS). Additionally, 0.5% is contributed to the Employee Deposit Linked Insurance Scheme (EDLI), which provides life insurance coverage to the employee.  

EPF Withdrawal  

AEPF allows for partial or complete withdrawal under specific circumstances, including retirement, resignation, unemployment, medical emergencies, education, and housing needs. However, the withdrawal conditions may vary based on the length of the employee’s service and other factors. Premature withdrawals may attract penalties or tax implications, so it is crucial to understand the rules before making any withdrawals.  

EPF Interest  

Contributions made by both the employee and the employer towards the EPF earn an annual interest, which is determined by the EPFO. The interest rate is subject to change every year and is generally higher than the rates offered by traditional savings accounts. The interest earned is tax-free, making EPF an attractive long-term investment avenue.  

EPF Online Services 

To streamline the EPF process for employees and employers, the EPFO has introduced various online services. Employees can now easily check their EPF balance, download their EPF passbook, track claim status, update KYC details, and even apply for withdrawals online. 

For instance, UMANG (Unified Mobile Application for New-age Governance) is a mobile application developed by the Indian government to provide access to a wide range of government services through a single platform. While it is not specifically designed for EPF (Employees Provident Fund), it offers various e-governance services, including EPF-related queries and services. This digital transformation has made the EPF experience more convenient and accessible for everyone involved.  

EPF and Taxation 

EPF enjoys tax benefits under Section 80C of the Income Tax Act, 1961. The contributions made by the employee are eligible for tax deductions up to a specified limit. However, if the employee withdraws the EPF amount before completing five years of continuous service, the withdrawn amount becomes taxable. It is advisable to consult a tax professional for guidance on the tax implications related to EPF.  

The Bottom Line

Ensure that you follow these guidelines if you are planning to apply for a payday loan online: 

  • Be cautious of scams and fraudulent lenders. Verify the legitimacy of the lender before providing personal information.
  • Only borrow what you need and can afford to repay on time to avoid additional fees and debt.
  • Read customer reviews and testimonials to gauge the lender’s reputation and customer service.
  • Prioritize lenders that use secure and encrypted websites to protect your personal information.
Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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