A retirement savings plan called an Employee Provident Fund is a pension plan primarily designed for employees of any company. Employee Provident Funds are managed and regulated by a statutory body called the Employees Provident Fund Organization (EPFO), which can provide financial support to the working class. Contributors can currently benefit from an interest rate of 8.1% per annum on the employees’ provident fund.
The Employee Provident Fund Scheme: Features and Benefits
Purchasing an Employee Provident Fund scheme for retirement offers a number of advantages. Below are a few of them.
- When you add an interest rate every year to the deposit, it builds up to the point where at the end of the employment there is enough corpus to be able to enjoy greater returns than you invested. This is called a value surge. Many investors are becoming more and more popular due to capital appreciation.
- Providing Financial Support after Retirement: EPF requires employees to contribute nearly 8.5% of their income towards their retirement plan in order to create a sense of financial security for them as they near retirement. A recurring monetary discipline will also be created for the employees as a result of the accumulated funds, which will ensure their financial independence after retirement.
- Stay on top of emergencies: Emergencies can occur at any time, so you should always keep cash handy. While it can be easy when you are young, things can be challenging when you retire. With an EPF account, you can potentially get enough funds on hand due to the accumulated corpus.
- A significant tax benefit that investors are entitled to be that they can save up to INR 1,50,000 every year on their income tax by making use of Section 80C of the Income Tax Act, which means that investors who put money into the EPF are eligible to save up to INR 1,50,000 each year on their income tax.
- EPF allows an investor to withdraw cash before their tenure ends. There might be times when one cannot wait until their retirement and needs cash now. This provision allows the investor to withdraw funds early. Contributors are able to withdraw their funds before their tenure ends by taking advantage of this provision. Medical emergencies, weddings, holiday plans, etc., can be all reasons for withdrawals.
One can use an EPF Calculator India to make calculations related to EPF in a simpler manner.
EPF Account Opening Criteria
A person who wishes to participate in the Employee Provident Fund scheme must meet certain criteria in order to qualify.
- There are certain people who are required to contribute to the Employee Provident Fund in India, who earn less than INR 15,000 a month as their monthly income.
- Any person that earns more than INR 15,000 a month needs to get the permission of the employer and the Assistant PF Commissioner before they can apply for an EPF account.
- The Employee Provident Fund (EPFO) is a compulsory contribution to the Government’s Employee Provident Fund and is required of any organization or company with more than 20 employees in accordance with the law.
- Organizations with fewer than 20 employees can also voluntarily sign up as contributors to the scheme even if they do not have employees.
Contribution To The EPF
The annual budget of 2015 provided some relief to employees who were contributing to the EPF and covering their living expenses at the same time. This was accomplished by reducing the minimum monthly contribution to 12%. The result was a significant increase in income for income earners. This was mainly because now the employer is also required to contribute to the EPF accounts of their employees.
Additionally, the employer must contribute 8.33% to the pension contribution of each employee, in addition to the EPF.
- Documents Required for PF and Esi Registration
- Payment Due Dates in India (Esi, PF, Tds)
- What Is the Formula for Calculating Epf?