The Employees’ Provident Fund (EPF) was started in 1952. Since then it has remained a reliable scheme. A large number of employees invest money in this scheme. This is a scheme whose benefits are given to the employees. There are three different aspects to this whole scheme. First the employee, second the employer and third the government. Let us know every single thing related to this scheme –
How much do employees and employers contribute?
The eligible employee has to contribute 12% by adding his basic salary and dearness allowance. At the same time, the employer has to contribute the same amount. At the time of retirement, the investor gets the full amount back with interest. Suresh, Founder, Ladder7 says, “12% of the work done by the employee goes into the EPF account. At the same time, out of 12% of the employer, 3.67% goes to the EPF account and the remaining 8.33% to the EPS (Employee Pension Scheme) account. If you contribute more than 12% to EPF, it gets converted into VPF. In such a situation it is not necessary to match the employer’s contribution again.
Contributions of less than 12% are also recognized in certain circumstances. For example, if the number of employees in the company is less than 20, then in such a situation the employee and employer can contribute up to 10%-10% percentage. This is so that people invest more and more in EPF.
Benefits of EPF
Among the many benefits of the EPF scheme is its interest rate. At present, an interest rate of 8.5% is available under this scheme. This interest rate is calculated on a monthly basis.
Free insurance benefits
After any person gets a job, his PF account is opened. As soon as the PF account of the employee is opened, then he also becomes insured by default. Under the Employees’ Deposit Linked Insurance Scheme (EDLI), the employee is insured up to Rs 7 lakh. In case of death of an active member of EPFO during the period of service, up to Rs 7 lakh is paid to his nominee or legal heir. Companies and the central government provide this benefit to their employees.
Tax exemption under 80C in income tax
EPF is a great way to save tax for the working class. Under section 80C of Income Tax, income tax exemption is available on Rs 1.5 lakh deposited in EPF. EPF account holders can save up to 12 percent in tax on their salary. However, this benefit has been discontinued in the new tax law and can still avail this benefit by opting for the old tax regime. But during this time it should also be kept in mind that contributions above Rs 7.5 lakh will be taxable from now on. At the same time, in VPF it is up to Rs 2.5 lakh.
When can you withdraw money from EPF scheme?
EPF can be withdrawn only during retirement, unemployment or some extreme circumstances. The entire amount can be withdrawn only after retirement or after two months of continuous unemployment. As per the new rule EPFO allows withdrawal of 75% amount from EPF fund after 1 month of unemployment. If you remain unemployed for 2 consecutive months, you can also withdraw the remaining 25% of the funds. Meanwhile, if a new job is found, then the remaining 25 percent amount can be transferred to a new EPF account. Family members can also withdraw money on the death of the employee.
Why is UAN Number Important?
Universal Account Number (UAN) is a 12-digit number allotted by the Employees’ Provident Fund Organization (EPFO) to every employee having a provident fund account. This number allotted to an employee remains the same throughout the time irrespective of the change in job. When an employee changes jobs, EPFO allots a new member identification number of the EPF account ID, which is linked to the UAN.
