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Employees Provident Fund: Scheme and Rates

Personal Finance

An employee has to bear a lot of expenses. It becomes more significant for those who are the sole earning member of the family living with ailing parents and other members. Moreover, in times of emergency, it becomes essential to have money on hand. Hence, you will need to know about the employee’s provident fund, which can improve your finances.

Let us learn what a provident fund is, its benefits, and its various schemes.

What is a Provident Fund?

Before you finally sign the papers, you need a clear understanding of the Provident Fund. There are a few schemes and rates that will cater to your needs and help you plan your finances accordingly.

The Employees Provident Fund was first introduced in 1935. It is currently managed by the Employees Provident Fund Organization (EPFO), which is administered by the Government of India. The Provident Fund is the amount you will be charged based on your salary. It can only be withdrawn after a certain period.

The purpose of the provident fund is to help employees regulate their monthly income after retirement. The contribution criteria are fixed for all industries. The amount of the contribution is always rounded up for every employee, be it an EDLI contribution, a pension contribution, or an employee share. The actual percentage for the employee is derived from the pension contribution and EE share. The EE share is given as per the statute limits.

Benefits of an Employee Provident Fund 

You need to know that provident donors have been made mandatory who will fulfil at least 15,000 thresholds of income. Under section 80C, an employee can get about Rs. 1.5 lakh of income tax exemption in a financial year if they get signed up with EPF.

Here is why an EPF is beneficial to employees:

Loan against PF.

Having a PF account is a wise idea, as, during an emergency, you can get a loan against your PF account. Once the loan is paid, it will be credited within 36 months after the loan disbursal. 

Free insurer. 

In the unlikely event that the employer dies during the service, the individual becomes eligible for 6-7 lakh free insurance. 

Enhanced loan repayment. 

If you have an issue repaying the loan, having a Provident Fund account will be a wise idea. You can use your PF account to repay your loan. 

Schemes Under EPF

Under the Employers Provident Fund Act 1952 in India, you are eligible for PF once you earn a certain amount. Whatever the case may be, there are a few schemes that you should be aware of:

  • EPF Scheme 1952: Under this act, the person who maintains the EPF account will be able to use the accumulated money after retirement. 
  • Employees’ pension scheme: Under the employer pension scheme act 1952, the Provident Fund account becomes the only source of superannuation pension. Under this act, the widow or widower’s pension or orphan is payable. 
  • Employees’ Deposit-Linked Insurance Scheme, 1976: The Employees’ Deposit-Linked Insurance, or EDLI, scheme is the one that provides insurance benefits to the employer of an organization. 

Rate of Interest for EPF 

While you are halfway through this read, you should also know about the rate of interest on the EPF. The Ministry of Finance has decided on a rate of 8% for the financial year to be paid to the EPF account holder. However, you need to be aware of the specific rate of interest that will be deducted from your Provident Fund account. 

  • The employer will get as much as 12% of the salary contributed to the EPF account. 
  • In the case of a salary of Rs. 15,000, a charge of 8.33% of the salary will be deducted.

Who Caters to Provident Fund?

The first thing you will need to know is that the EPF is a government-funded retirement plan for salaried people. For that, you must know who caters to EPF accounts:

  • To qualify for EPF, an individual must be at least 18 years old.
  • The salary must be at least Rs. 15,000 so that a minimum of 8% can be deducted from the salary account. 
  • Other than this, the employer can also contribute Rs. 1.5 lakhs annually to the EPF account if one wants to fund it with their annual increment. 

Investment Schemes of the EPF 

The Employee Provident Fund is a venture plot in India that assists with getting retirement benefits. The plan is worked on by the public authority and has various investment schemes. It would help if you learned that investments made through a provident fund are non-taxable as per the government’s regulations. Moreover, the amount of interest you earn will be tax-free; hence, investing through a provident fund is a wise idea. 

Documents Required for EPF 

There are a few documents that you will be required to produce while signing up for an EPF account:

  • The name of the applicant
  • The PAN number of the applicant
  • Any other ID proof, such as voter ID, a driver’s licence, or an Aadhaar card
  • The employer also needs to provide address details
  • There is also a requirement to provide proof of the address of the premises. 
  • The applicant’s contact information should include a working phone number and a residential address.
  • You will need to show your monthly salary slips.

You must provide all the above documents while considering signing up for the Employer’s Provident Fund.

Final Thoughts

Now that you have a clear understanding of Provident Fund, you can read related blogs and articles on the Piramal Finance website. It is also suggested that you seek the assistance of a financial advisor who can guide you through the EPF application process and help you make sound financial decisions.