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Employees Provident Fund (EPF)

Employees Provident Fund (EPF)  scheme India was enacted in the year 1952 replacing the Employee Provident Fund Ordinance, 1951. The EPF Scheme is now known as Employees’ Provident Fund and Miscellaneous Act, 1952. The administration of the act is carried out by the Central Board of Trustees that includes representatives of three parties viz the government, employers and employees. The board is assisted by the Employees’ Provident Fund Organisation (EPFO) which falls under the purview of the government through ministry of labour and employment. EPF is administered by the Employees Provident Fund Organisation of India (EPFO). Legally, it is compulsory for the companies consisting of more than 20 employees to register with this organisation..

The EPF is built through regular, monthly, contributions made by an employee and his/her employer. The amount contributed is based on the fixed rate and employees earn interest on their EPF balances. The interest earned on the EPF balance is tax free.

This is a kind of scheme providing retirement benefits which is available to all paid employees, and hence this scheme is really an important tool for planning your retirement  By applying for this scheme you are actually saving a part of your salary every month so that the saved amount can be used upon your retirement, or when you are incapable of working. If you continue with this scheme for a long time, you can easily meet your retirement goals. Many a times, we suffer from shortage of funds and have to borrow money from other sources,that time EPF comes to our rescue as the scheme serves several advantages of which many of us are not aware of.

Benefits of EPF:

  • Tax Free Earnings: The interest on funds in EPF account is tax free.The withdrawals at the time of maturity/ beyond 5 years is also tax free.
  • Financial security: It is not that easy to withdraw funds from EPF account so the savings is ensured.The amount collected provides financial security at the time of retirement. Premature withdrawal is allowed in certain cases  which can prove to be of help,during emergencies.
  • Universal Access: Employees can now transfer their accounts whenever they change their employers.And now with the introduction of Universal Account Number employees can access their EPF accounts
  • Pension benefits
  • Pension to EPF member: In order to get the pension amount after a certain period of time, your age has to be 58 years and along with that there should be a minimum of 10 years of tenure. But if you claim for the pension amount before 10 years, then you will not be eligible to get the pension. It is to be noted that you will get interest on the EPF exclusive of the pension part.
  • Pension to the family (after the member’s death).
  • Scheme Certificate: This certificate shows the member’s family and service details. It is issued to the members who has not yet attained the age of 58 at the time of leaving any establishment. After the age of 50 and above, if the member wants to apply for his pension, then he will have to surrender this very certificate. Members can also surrender this certificate at the time of joining any other establishment and along with his former service details, his new service details will be added in the certificate.
  • Death benefits
  • Capital Return of Pension.
  • Pension to family (or to nominee/parent).
  • Insurance amount (EDLI) to family ( or to nominee): According to Employee Deposit Linked Insurance or EDLI scheme, when the employer of any company doesn’t provide any group health insurance policy to their employees, the company has to pay .5% of basic monthly pay (max. amount Rs.6500) in the form of premium for the life insurance of the employees.
  • Provident Fund amount to family (or to nominee): Many of you may not know that an EPF member can actually nominate any of his family members. Later after the death of the EPF account holder, this family member can apply for claiming the account.
  • Withdrawal benefits
  • If the member does not fulfil the eligibility for pension, he can withdraw the amount stored in his pension account.
  • This amount’s calculation is based on (1) Service, (2) Last average salary.

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