No matter what the time period is, every child will wait for the arrival of vacations and plan and dream about all the fun they will have. As we progress through our education and age, we plan for higher education and college. Then our thoughts will eventually go to our careers. When our college days get over, we plan on settling down, on marriages, which is followed by the plans for the family. Once a person reaches this particular stage, he will start thinking about securing the future of the family. For employees working in the private sector, the Employee Provident Fund (EPF) is a very famous investment scheme with tax saving including the other benefits.
Employee Provident Fund (EPF) is a significant tool while planning for retirement.
What is Employee Provident Fund?
The Employee Provident Fund (EPF), introduced under the Employees’ Provident Fund and Miscellaneous Act (1952), is a savings scheme. It is managed and administered by the Central Board of Trustees, and it has representatives from three parties which are the employees, the employers, and the government. The activities on this board are assisted by the Employees’ Provident Fund Organization (EPFO). EPFO is managed through the Ministry of Labour and Employment and works under the direct jurisdiction of the government.
This scheme aims at promoting savings to be used by the employees post-retirement in the country. EPF is a collection of funds which is contributed every month by the employer and the employees.
What is the Eligibility Criteria for the EPF Account?
- In order to avail the advantages of the scheme, the employees must become an active member of the scheme.
- Since the day employees join the organization, they are eligible for availing insurance benefits, Provident Fund, including pension benefits.
- EPF benefits can be given to the workers in an organisation that employees a minimum of 20 workers.
- This scheme does not cater to the people living in Jammu and Kashmir.
Employee’s and Employer’s Contribution towards EPF
The employer can make a minimum contribution, an amount of Rs. 15000 at a rate of 12%. They could even voluntarily contribute even more. This amount will be equal to Rs. 1800 every month. This means that the employee and the employer can contribute Rs. 1800 each every month towards the scheme. At first, the amount set was Rs. 6500 at 12% which is equal to Rs. 780 which will be contributed by both the employee and employer.
Benefits of EPF Account
Here are some amazing epf benefits for employees.
1. Tax-Free Savings
The EPF scheme provides specific interest rates on the deposits at certain rates which will already be decided by the organization. The Indian government deems both the actual deposited amount and the amount of interest received on the deposits to be completely tax-free. Any sort of withdrawal made at post completion of 5 years or maturity of having availed the certain scheme is completely tax-free. However, it will not be free of tax if you withdraw the deposited amount prematurely (i.e. before the 5 years of completion). This feature of the scheme will help the employee receive better benefits which will be in the form of additional income to his savings. This will be in the form of interest.
2. Long-Term Financial Security
Funds that are deposited in this kind of account cannot be easily withdrawn by the person, and therefore, it helps to ensure savings.
3. Resignation/ Quitting the Job
The employee can withdraw 75 per cent of the EPF fund after resignation after a month of the date he/she quit the job. The remaining 25 per cent can be taken 2 months after being unemployed.
4. Unseen circumstances
The employee can use the accumulated fund in case of any type of emergency. The employee can decide to withdraw the fund prematurely. The scheme allows for such premature withdrawal in special specific cases.
5. Income/ Unemployment Loss
There might be some cases where the employee loses the job they currently have because of any reason. During these times, the funds can be used to meet that person’s expenses.
In case the employee passed away, the collected amount including the interest is given to the nominee of the employee. These epf benefits after death will help the family get through the difficult times.
In cases of sudden retrenchment or layoffs from the job, this fund can be used by the person until that person gets another stable job. This is another epf tax benefit.
8. Disability of the Employee
If the employee cannot work anymore or is not the position of working, then that person will be able to use the funds and these funds can help the person get through their tough time.
9. Long Run Savings
This scheme is full proof and safe for individuals that wish to have investments in the long run.
10. Retirement Period
The fund that is accumulated under the scheme can be used by the employee at the time of his retirement. In the form of monetary security, this scheme will provide relief to the employee that is retired. Almost everybody will find the epf retirement benefits very useful.
11. Liquidity of Funds
At an hour of financial crisis, this scheme will act as another source of income for the individual. The funds that are obtained like this can be used to meet unavoidable expenses like education needs or medication needs.
12. Pension Scheme
The employer also makes necessary contributions towards the pension of the employee and contributes towards the PF fund which can be used by the employee after retirement. Epf pension benefits are very useful.
13. Accessible All Over
When you have the Universal Account Number (UAN), the employees will be able to access their PF account easily via the EPF member portal. This way they will be able to transfer their accounts every time they want to shift their current jobs.
14. Insurance scheme
This act provides for some provisions where the employer of the organization is required to contribute towards the life insurance of the employee, but the group insurance over will not be present. This scheme thus makes sure that all the employees are insured properly.
15. Special Occasions
When you need money for special occasions like for a wedding, education for children, self, or sibling, then you can withdraw up to 50 per cent contributions from your account. The member is allowed these benefits for three times. To access these benefits, the member must have served for at least a time period of seven years. The members should also have the proper documents for the events.
Members can choose from their account for maintenance of a house, house repair, or for the repayment of loans you might have taken to get the house.
Here are some common questions people might have.
1. How is EPF Different From PF?
PF is the popular name for Employee Provident Fund or EPF.
2. What is UAN?
Universal Account Number (UAN) is a 12-digit number which is unique for every member who registers with the EPFO. This unique number is linked with the member’s PF account.
3. What is The Current Interest Rate on EPF?
The current rates where the employee contributes is 12% of the basic salary along with dearness allowance each month. The employer also contributes 3.67% towards EPF and 8.33% towards EPS to the employee’s account.
4. How to Calculate Interest Rate on EPF?
EPF interest is deposited to the account at the end of every year though they are calculated every month. Check out this following example:
Dearness Allowance+ Basic Salary= Rs. 15000
Employee’s contribution= 12% of Rs.15000= Rs.1800
Employer’s contribution= 8.33% of Rs.15000=Rs.1250
Employer’s contribution= Employee’s contribution – Employer’s contribution= Rs.550
Total EPF contribution (every month)= Rs.1800+ Rs.550= Rs.2350
Interest rate between 2017 and 2018 was 8.55%
So, when calculating the interest, the interest applicable each month= 8.55% /12= 0.7125%
Let’s assume that the employee joined the service on April 1, 2017. The contributions start from April 2017-2018
Total EPF contribution for the month April= Rs.2350
Interest on the EPF for month April= Nil
EPF Account balance (end of month April)= Rs. 2350
Total contribution for month May= Rs. 4700
Interest on the contribution for month May= Rs.4700 * 0.7125%= Rs.33.49
5. How to Check EPF Balance?
A member can check the balance online by these simple steps:
- Visit the EPF’s website at www.epfindia.gov.in
- Click on the “For Members” you will find in the “Our Services” section.
- Select “Member Passbook” option.
- Enter the “UAN”, password, and the captcha code to login to your account.
- Select “Member ID” to see your passbook.
- Your passbook will show the details in the documents.
You could also check your balance by sending a message in the format EPFOHO <UAN> ENG to 7738299899.
You could check by sending a missed call to the number 011-22901406
6. Is There Any App for EPF Services?
Yes. Services can be provided by the EPF for mobile users through the Umang app. This app has five sections:
- Employee-centric Services
- General Services
- Employer Centric Services
- Pensioner Services
- eKYC Services
7. After Switching Company, Should I Withdraw EPF Account or Transfer My Funds?
It is best if you transferred your funds from the previous PF account to the current one. If the amount is withdrawn within 5 years, the amount will be taxed, and it should be mentioned under the income while filing for ITR.
8. Can I Withdraw My EPF Account If I am Unemployed?
Yes, after one month of employment you are allowed to withdraw 75% of your EPF. If you are still continuously unemployed for 2 months, then you can withdraw the remaining 25% of your EPF fund.
This is a tax-free interest, and the maturity will make sure that your money sees good growth. When you continue this scheme for a very long term, then it can help you with meeting your retirement goals. You will also be able to fulfil your other emergencies and goals because sometimes, we might be short on funds. At these moments, EPF can turn out to be very helpful because of the benefits they provide which many individuals are unaware of.