The Employee Provident Fund (EPF) is a savings scheme under the administration of the Employee Provident Fund Organisation (EPFO). The Employees’ Provident Fund and Miscellaneous Act, 1952, is the legislative act for the EPF scheme in India. The Central Board of Trustees takes charge of the governance and maintenance of the EPF system. Elected officials of the government, the workforce, and the government are the members of this body. The primary purpose of the EPF scheme is to enable investments by individuals that can be used after their retirement. Each company hiring 20 employees or more is responsible for supporting the employee with EPF benefits. There is a PF number for every employee registered under this scheme and UAN (Universal Account Number). Although the PF number varies every time the employee changes his or her company, the UAN is permanent.
Calculation of EPF balance
The contributions to the EPF are rendered every month by both the employer and the employee. A deduction of 12% is rendered per month from the salary of the employee (salary = basic salary + dearness allowance). The employer shall make an equivalent amount of contribution against the EPF of the employee. The 12 per cent amount contributed by the worker is extracted in the following way:
- 3.67 per cent of the salary towards EPF
- 8.33 per cent of the salary towards EPS (Employees’ Pension Scheme)
The employer must also make an additional 0.5 per cent contribution to the Employee Deposit Linked Insurance Scheme (EDLI). A certain interest rate is attracted by the accrued amount in the employee’s EPF account. Generally, for a financial year, this interest rate varies. This interest rate was 8.50 per cent for the financial year 2019-20.
The cumulative amount that is saved in the EPF account is 100% exempted from taxes. Consequently, without caring about some form of tax deduction, an employee can subtract the total amount from the EPF account. In the event that no contribution from the EPF is made to the employee’s EPF account for a span of 36 months, it becomes inactive. If the account is not operational and the account holder has not met retirement age, interest on the account is provided. This interest is subject to tax, however.
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at informalnewz@gmail.com
