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Why EPF is Still Believed to be the Father of all Savings in India

Updated on: 4th Jun 2024

3 mins read

The employee Provident Fund is part of the act 1952 made by government of India with the purpose of providing social security to employees at the time of their retirement, illness or any other state of emergency.

The chief motive of PF fund is to benefit employees by saving a little money of their salary every month. He can use this lump sum in an event where the employee is no longer fit to work or at retirement. The employers and employees contribute an equal amount, which is the 12% of annual salary. The company contribution is split into two parts, 8.33% on Family Pension Fund and 3.67% on Employee Provident Fund.

Eligibility criteria for EPF

It is mandatory for an employee earning a basic salary upto15,000 Rs or less to become a part of EPF scheme. Contributions are voluntary/chosen if the employee earns more than Rs. 15,000. It is advisable for every employee to contribute towards EPF scheme as it instills a financial discipline and help them plan their finances better.

5 Things to know about Provident Fund:

  • Your PF is easily transferable if you go for job change. The current balance will remain, and fresh contributions will start adding into PF account by the new employer. The transfer is done automatically these days by linking UAN with Aadhaar. All you have to do is fill form 13 and submit it with PF department/body.
  • The EPF has three social security schemes:
  1. Employee’ Provident Fund 1952
  2. Employees’ Pension Scheme 1995
  3. Employees’ Deposit Linked Insurance Scheme 1976
  • EPF is a specified payment scheme, where the interest rate is set every financial year by the central government. For 2017-18, the interest rate is 8.65%.
  • If you don not contribute some money in PF account for 3 consecutive years and it remains inactive then the money in your PF will stop earning any interest.
  • If you do not have any kind of group life insurance then you can contribute your 0.5% of annual salary towards a life insurance within PF. This might seem like a small amount but in trying times this money may prove to be a boon.

Criteria for EPF withdrawal:

Interestingly, EPF withdrawal is taxable under certain circumstances and exempt under the certain circumstances. But first it’s important to know when and how a person can withdraw their PF money. Here are a few:

  • If you are quitting your job for various reasons, you can withdraw money from your PF account. Just fill form 19 with your required details and get the form attested by the employer for quick settlement.
  • In the case of emergencies such as repaying a home loan, medical urgency, marriage and so on you can withdraw money, but there will be a limit to the amount that can be extracted.
  • The complete withdrawal of your PF savings are possible only after reaching an age of 55 years, retirement, moving abroad permanently from India and if there is permanent or total disability.
  • If the account holder has met with an untimely death, then the listed beneficiary will get the collected funds that he can withdraw whenever he requires.

Today, most companies automatically start a PF account on behalf of their employees. There were times when during employee separation for whichever reason; both the employee and the employer used to indulge in paperwork and lot of formalities before the employer could receive his/her PF amount. But with advent of intuitive HR processes these formalities take seconds and are automatic. The PF scheme is a great and long-standing initiative by Indian government, which has helped many families in India and continues to do so.

Kanika Jain

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