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| What is EPF (employees provident fund) || theeco.info |
EPF (Employee Provident Fund)
Before knowing the Employee Provident Fund, it is important to know about the Provident Fund. Normally a provident fund is a saving scheme in which a reliable good corpus is assembled at the time of retirement of the person, for which the provident fund scheme is designed.
Normally the Provident Fund has been designed in such a way that the financial security of the elderly people is available when they retire from their service, which is generally not available to everyone. To help in this subject, the Government has started the schemes of Provident Fund.
The investment in a provident fund is a very low risk investor because most of the money that is invested in it is mostly invested in debt and at the same time there is government support behind it, due to this it gets good interest.
What is EPF (Employee Provident Fund)
⨳ The Employee Provident Fund is a savings scheme introduced in accordance with the Employee Provident Fund and Miscellaneous Act 1952. In the Employee Provident Fund Scheme, if an employee normally works in an organization company, the EPF will be automatically deducted from his basic salary.
⨳ The EPF manages the EPFO (Employee Provident Fund Organization) which is a trust that comes under the Labor and Employment Minister of the Indian Government.
⨳ The EPF has been created in such a way in which the employee and the employer make some contribution (money) and the money is invested in equity in the market in debt. Here the government also decides investment and interest, due to which there is very little risk.
⨳ Investments made by a large number of employees are put together and are managed by EPFO.
⨳ As the government announces its interest rate every year by the EPFO, the interest rate for the final year 2019 is 8.50%.
Eligibility & Contribution of EPF
⨳Now we will talk about the basic eligibility and contribution of EPF, so what is the eligibility? First thing is that according to the law, if there is an organization company or a registered company with more than 20 employees, then it is mandatory to be registered in the EPFO.
⨳ If any of company is registered with the EPFO, then the employer and employee of that company keeps contributing to the EPF at 12% salary every month. This means that 12% of the salary (Basic + D.A) that the employee receives will be contribute in the EPF and the same amount will be added by the employer.
⨳ In most of the private sector, salary is not calculated on Basic + DA. Whatever contribution is 12 percent is calculated only on the basis of basic salary.
⨳ If a company has less than 20 employees and wants to be registered with the EPFO, the contribution rate that the EPFO has fixed is not 12 percent contribution, it's fixed 10%. Which means employer-employee who will give 10% of their contribution to EPF.
⨳ This was 12% and 10% contribution of the employer and the employee, but voluntary employees can contribute extra money from their salary that is known as the voluntary provident fund. It is calculated separately and the interest rate it has is also higher than the basic EPF.
⨳ The 12% which is contributed to the EPF by the Employer is not introduced or calculated in the EPF, but 8.33% is added to the Employee Pension Scheme and the remaining 3.7% is added to the EPF.
⨳ The calculation made for the Employer and Employee that the maximum basic pay is based on ₹ 15000. Employee will get 12% of his salary cut, however much that may be. But the 12 percent of the employer is calculated for which the maximum basic pay is calculated at ₹ 15000.
Even if an employer has a basic pay above ₹ 15000, the 12% contribution will be calculated at ₹ 15000 only.
So this is the point of eligibility and contributions in the context of some EPF.
Withdrawal in EPF
How withdrawal is done in EPF, so normally the employee is not withdrawn from his EPF account until the employee retires and till the age of 50 - 60 years, but withdrawal is allowed in some circumstances. Which is as follows.
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| withdrawal in EPF employees provident fund |
1.Condition
If a person has become jobless or wants to become a self-employed, in that case, that person can withdraw money from his EPF account contribution in two months. The first month can take up to 75% withdrawal and in the second month the remaining 25% can also be withdrawn.
Meaning that if you are not doing job or want to be self-employed and you already had some money in EPF, then you have to wait for 2 months to withdraw the total money.
2.Condition
If a person is out of the country for a job or is being settled then in this circumstances, the person is optionally available to withdraw all the money from EPF, but for this, the person has to provide whatever document is there.
3.Condition
The third condition is of withdrawal only for the female employee in which she is leaving her job due to marriage, so in that case she can also withdraw her total in the EPF together with that total. It is mandatory for female employees to provide their marriage certificate and other important documents.
Partial withdrawal in EPF
The withdrawal of money from EPF can also be done. For this, the first condition is that if there is complete service for 7 years, then a person can withdraw up to 50% in 3 times of life.
Then we will see what conditions you can withdraw money after fulfilling this condition: -
⨳ Marriage or education of yourself or children
⨳ Repay of home loan
⨳ Alteration or repair of home
⨳ Emergency Medical Expense of yourself, spouse, children or dependent parents.
Note
* Minimum 10 years service in home loan condition.
* Minimum 5 years of service should be done for Alternation.
* Minimum 10 years should be serviced for repair.
Tax issues of EPF
What are the tax issues in EPF (Employee Provident Fund)? The criteria of 5 years of service is seen in it if a person who has changed his job within 5 years but has transferred his EPF account to New Employer then it is known as a continuous service.
If you have completed the minimum continuous service for 5 years and withdraw from EPF, then you do not incur any tax. But if you withdraw from your EPF account before 5 years continuous service, then in that case there are tax issues.
What are those issues? The first is the contribution of the employee, whatever interest will be earned on that, tax will have to be paid on the year in which the money is withdrawn.
Secondly, whoever has claimed tax deduction under section 80C and is receiving 80C benefit from your contribution in EPF, then it will be added to your income in the year in which you will withdraw from it. And whatever interest you have received on your contract will be taxed on you, then it is many things that if you withdraw money before 5 years, then you can face some tax issues.
Balance Checking
EPF balance can be checked online. Whenever a person registers with epf, he gets a 12 digit universal account number which is also known as UN number which is linked to the PF account. The balance of EPF account can be checked through the EPF account's UN number. For this, the EPF e-service member portal can be used or you can also check through the Umang mobile app. Nowadays, you can check the balance of EPF with SMS missed call.
Advantage & Benefits of EPF
Apart from being a saving scheme, EPF has a lot of advantages and benefits which are as follows
Apart from being a saving scheme, EPF has a lot of advantages and benefits which are as follows
⨳ First in EPF which is that it is called tax free investment. For salaried class, the exempt, the exempt, the exempt status means that it has the option of triple exemption such as whatever money you are investing in that is tax exemption, whatever interest you are receiving in it that is text exemption and the money Withdraw will do that also tax exemption.
⨳ Second in which you can get a benefit of up to one and a half lac rupees under section 80C on the contribution present in EPF account.
⨳ Thirdly, where the interest is received on the total investment or withdrawal in EPF, it is completely tax free. In this case only the five year service needs to be completed.
⨳ Fourth EPF Advantage and Benefit where interest is not charged on the advance taken. It is also not necessary to repay in advance.
⨳Last important point Interest of 8.5% which is getting in EPF right now here is interest rate fix and quite good but compared to other instruments like PPF, Sukanya Samriddhi Yojana, NSC or bank or post office, FD etc. their returns are less than EPF.
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