The employee Provident Fund (EPF) is a government-managed retirement savings scheme for the employees of the public and private sectors. Every month, a set percentage of the employer and employee contribution to PF (Provident Fund) account is added to build a retirement corpus for the employee. These savings are accumulated every month and stay as a lump sum on retirement and at the end of the employment phase.
A Brief Intro About EPF
Employee Provident Fund, commonly known as EPF, is one of the most popular saving schemes offered by the Government of India. It is also the primary scheme under the Employee Provident Funds and Miscellaneous Act of 1952, managed by the Employee Provident Fund Organisation (EPFO). The Employee Provident Fund aims to build a sufficient retirement corpus through regular employer and employee contributions to PF accounts. The basic idea was to encourage the habit of saving for the employee’s golden years.
Key Points About EPF Contribution
As mentioned above, both the employer and the employee contribute equally to the employee provident fund. The employee’s base pay and dearness allowance determine the actual EPF contribution amount. The typical employee’s PF contribution is 12% of their base pay. Details of employee and employer contributions to EPF are shown below:
EPF Employee Contribution
Every month, the employer withholds 12% of the employee’s base pay plus the dearness allowance as an employee contribution to PF. The employee’s EPF account receives the entire contribution.
Employer’s EPF Contribution
Similar to how employees contribute to EPF, employers similarly contribute 12% of employee salaries. However, the employer’s contribution is divided into the following groups.
Key Takeaways
- The employee provident fund scheme works as a great emergency fund if and when a person suddenly requires money for health, accidents, or any other emergency requirement.
- People who are currently employed and eligible for the employee provident fund benefits can calculate the employee provident fund calculation with a simple formula that constitutes employee contribution to pf, which is 12% of the basic salary, and after adding the dearness allowance each month to the EPF account.
- Any organization employing a minimum of 20 employees is liable to give EPF benefits to its workers.
Employee’s Contribution Towards EPF
Category | Percentage EPF Employee Contribution (%) |
Employees Provident Fund | 3.67% |
Employee Pension Scheme (EPS) | 8.33% |
Employee’s Deposit Link Insurance Scheme (EDLIS) | 0.5% |
EPF Admin Charges | 1.1% |
EDLIS Admin Charges | 0.01% |
Who is Eligible for EPF Contribution?
- Employees need to know what the employee contribution to PF is and become active members of the EPF scheme to avail its benefits.
- Employees of a company are directly eligible for availing Provident Fund, insurance benefits, and pension benefits from the day they join the company.
- Any organization employing a minimum of 20 employees is liable to give EPF benefits to its workers.
Tax Liability on Employees’ Share of EPF
The tax exemption applies to the employee contribution to PF and interest contributions. Section 80C allows for a maximum tax deduction of Rs. 1.5 lakhs. There is no tax due if the PF money is withdrawn at maturity. But let’s say the employee takes a partial withdrawal because of an unexpected circumstance. The money will thereafter be taxed to the employee.
The withdrawal of an EPF balance is regarded as tax-free. According to the general norm, there are a few deviations dependent on the length of employment.
Documents Required for PF Account
The following documents are required to open a PF account:
- Digital Signature
- Updated Aadhaar Card of the applicant
- Pan Card
- Banking details and IFSC code
- Identity proof (passport, driver’s license, voter’s id, etc.)
- Address Proof
Conclusion
In addition to being one of the best investment tools for your retirement years, making regular employee contributions to PF can also help save taxes as EPF is exempt-exempt-exempt. It also offers excellent interest rates with low risk, thanks to its government backing. So while even though your employee contribution to PF may seem small at the moment, with time, it would help you save significant funds for later.
FAQs
The employee can, alternatively, check their EPF balance by sending an SMS to “7738299899” in the format EPFOHO <UAN> ENG
EPF balance can be checked through a missed call on the number- 011-22901406 too.
Having a PF account, where employees contribute to PF, will enhance your savings journey and keep you secure in your journey! It’s not mandatory to have a pension, though; it is highly recommended for your well-being in Life!
One may withdraw the lesser of six months’ basic pay, a dearness allowance, or the employee share plus interest.
The employer and employee contribution to PF account is 12% of the employee’s base pay.
Also Read: Login to EPFO Member Portal