EPF or PF – Eligibility, Benefits & Process
Credit: North Loop
Introduction -
Before we define the Provident Fund, let us take a look at some interesting facts. The EPF scheme is directed by three different Acts which are the Employees’ Provident Fund Scheme Act, 1952, the Employees’ Deposit Linked Insurance Scheme Act, 1976 and the Employees Pension Scheme Act, 1995. Till now, the Employee Provident Fund Scheme has catered to over five crore individuals.
EPF definition -
EPF or Employees’ Provident Fund is a popular savings scheme directed towards salaried individuals to facilitate their habit of saving money to build a substantial retirement corpus.
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How PF works in India?
To understand how PF works in India, continue to read further.
The Provident Fund India works by building a monetary reserve from the contribution extended by both employees and their employer each month. Around 12% of the employees’ monthly salary gets contributed to the Employee Provident Fund Scheme.
The PF account India thus built accrues a pre-fixed rate of interest set by the Employees Provident Fund Organization. If you are an employee, you can get a lump-sum amount on your retirement that is inclusive of the accrued interest.
The Provident Fund India works by building a monetary reserve from the contribution extended by both employees and their employer each month. Around 12% of the employees’ monthly salary gets contributed to the Employee Provident Fund Scheme.
The PF account India thus built accrues a pre-fixed rate of interest set by the Employees Provident Fund Organization. If you are an employee, you can get a lump-sum amount on your retirement that is inclusive of the accrued interest.
EPF India online application -
For EPF India online application, you can access their official portal. It is a user-friendly platform and keeps the flow of services transparent and hassle-free.
Provident Fund eligibility -
The Provident Fund eligibility includes the following criteria -
It is open for employees of both Public and Private sectors. Any organisation that employs more than 20 individuals is deemed liable to extend benefits of EPF to its employees.
If an employee becomes an active member of the scheme, they get considered eligible to avail the Employees Provident Fund Scheme benefits, insurance benefits and pension benefits.
Now that we have defined the provident fund let us read the benefits of the Provident Fund India scheme -
Capital appreciation - The PF account India offers a pre-fixed interest on the deposit held with the EPF Scheme. Rewards also get extended at maturity to ensure growth in employees funds and facilitate capital appreciation.
Corpus for retirement - The EPF deposit helps to build a healthy retirement corpus in the long run that can extend a sense of financial security and independence after entering the retirement phase.
Emergency corpus - An EPF deposit acts as an emergency corpus during any sudden financial crisis. Since life is full of uncertainties, getting financially prepared for unprecedented events always gets recommended.
Tax-saving - The provident fund money is exempt from tax under Section 80C of the Income Tax Act, 1961. The earnings generated from the provident fund money are also tax-exempt up to a maximum limit of Rs.1.5 lakh. These tax benefits ensure higher earning and improved savings as well as purchasing-power in the long-term.
Easy premature withdrawal - Partial withdrawal is also available for members of the EPF Scheme. It can get used to meet various expenses such as those for higher education, construction of a house, weddings, medical treatments etc.
It is open for employees of both Public and Private sectors. Any organisation that employs more than 20 individuals is deemed liable to extend benefits of EPF to its employees.
If an employee becomes an active member of the scheme, they get considered eligible to avail the Employees Provident Fund Scheme benefits, insurance benefits and pension benefits.
Now that we have defined the provident fund let us read the benefits of the Provident Fund India scheme -
Capital appreciation - The PF account India offers a pre-fixed interest on the deposit held with the EPF Scheme. Rewards also get extended at maturity to ensure growth in employees funds and facilitate capital appreciation.
Corpus for retirement - The EPF deposit helps to build a healthy retirement corpus in the long run that can extend a sense of financial security and independence after entering the retirement phase.
Emergency corpus - An EPF deposit acts as an emergency corpus during any sudden financial crisis. Since life is full of uncertainties, getting financially prepared for unprecedented events always gets recommended.
Tax-saving - The provident fund money is exempt from tax under Section 80C of the Income Tax Act, 1961. The earnings generated from the provident fund money are also tax-exempt up to a maximum limit of Rs.1.5 lakh. These tax benefits ensure higher earning and improved savings as well as purchasing-power in the long-term.
Easy premature withdrawal - Partial withdrawal is also available for members of the EPF Scheme. It can get used to meet various expenses such as those for higher education, construction of a house, weddings, medical treatments etc.
Provident Fund applicability limit -
As per the Provident Fund applicability limit, employees whose pay is more than Rs.15000 per month at the time of joining are not eligible and get referred to as non-eligible employees. Those who draw less than Rs.15000 a month get required to become members of the EPF. The former can also become a member with permission of the Assistant PF Commissioner.
EPF Table -
If you are still confused and thinking about ‘how much can I invest in EPF’, check out the table below -
Now that we have provided you with the answer to - how much can I invest in EPF, let us look at the rate of interest offered by the EPF Scheme:
The pre-fixed interest rate offered by the EPF Scheme for the FY 19-20 was 8.55%. The interest amount accrued on the employee pension scheme balance is tax-free and such interest gets paid only on the operative PF accounts of employee member’s tax slab.
You should also note that the share contributed towards Employee’s Pension Scheme balance does not accrue interest. However, if you are a member, you can get entitled to receive a pension out of the accumulated sum after turning 58 years old.
| Features | EPF |
|---|---|
| Interest Rate | 8.5 % |
| Who can Invest | Only Salaried Employee |
| Employer Contribution | Yes |
| Minimum Investment | 24% of Basic Salary |
| Lock-in Period | Retirement or Resignation |
Now that we have provided you with the answer to - how much can I invest in EPF, let us look at the rate of interest offered by the EPF Scheme:
The pre-fixed interest rate offered by the EPF Scheme for the FY 19-20 was 8.55%. The interest amount accrued on the employee pension scheme balance is tax-free and such interest gets paid only on the operative PF accounts of employee member’s tax slab.
You should also note that the share contributed towards Employee’s Pension Scheme balance does not accrue interest. However, if you are a member, you can get entitled to receive a pension out of the accumulated sum after turning 58 years old.
Conclusion -
The primary aim of EPF is to enable you to become financially prepared for retirement, and most professionals suggest that you should avoid premature withdrawal of your balance until necessary.
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