EPF, also known as the Employee’s Provident Fund is a public scheme for retirement benefits. This fund is created with contributions made by the employee and employer for the individual’s account. Under the scheme, the contribution is taken every month from the employee for the fund and the same amount is contributed by the employer.
This fund is managed by the EPFO (Employee Provident Fund Organization). The EPFO mandatorily states that an organization having 20 or more permanent employees working in its listed industries should register with contributing for Employees provident fund. Since it is managed by the government as a social security scheme for employees, the rate of return is also slightly higher than that of other savings schemes and methods.
It is important to note the salient features of EPF, which is a common form of investment among salaried employees:
1. Contribution to EPF:
All the organizations which are registered under the Employee Provident Fund Organization (EPFO) should contribute to provident fund for their salaried employees. While the employee contributes 12% of his/her basic salary and DA, the employer should contribute an equal amount. It is not considered as income for the employee but rather is an expense for the employer. The employee can make an additional contribution up to the total basic salary into his or her EPF account. This amount goes to the Voluntary Provident Fund, under the same organization.
2. Security of the Invested PF:
The EPF and the organization are governed by the public and is guaranteed under the government of India. As a public entity, the safety of your investment is assured.
3. Exemption from Tax:
All the contributions towards the Employee Provident Fund are exempted from tax. The first exempt level is on contribution up to Rs.1.5 lakh under section 80C of Income Tax Act. The second exemption comes from interest earned and the third exemption also applies during the time of withdrawal. The three levels of exemption are applicable after a minimum of five years of the term.
4. Withdrawal Facility:
It is possible to completely withdraw your EPF funds when you’ve reached the age of retirement as per the rules of the organization or when an employee is unemployed for 60 days. Partial withdrawal of the PF funds can be permitted to meet certain life goals such as home purchase, loan repayment, construction or renovation, medical treatment and marriage of children. However, the partially withdraw facility is generally discouraged as the aim of the scheme is to provide long-term saving.
You will need UAN number activation to withdraw your pf contribution. If you do not know uan number you can read how to activate uan number online at EPFO website for Indian employees.
5. Easy to Operate
A Unique Account Number (UAN) is given to employees on the opening of an EPF account. It is a unique number which changes from individual to individual. This number is used for all the services related to PF transactions. Further, it is easy to track all account activities and monitor them online through the official website. In case of change of organization, the employee must give details of the UAN to the new employer. The PF funds will then be transferred to a new employer and contribution will continue from the new organization. Further, it is possible to register a nominee for the EPF contributions and funds. The amount will be transferred to the nominee in case of death of the individual. If this is not registered, the amount will be given to an immediate family member or legal heir.