How Is Provident Fund Calculated On Salary?

Through a provident fund (PF), you contribute a part of your salary each month towards the pension fund. The amount accumulates over a period of time and you get it as a lump sum upon retirement or at the end of the employment. Every setup with more than 20 employees or more has to offer PF to its employees.

Calculation of PF

PF contribution has to be made both by the employees and the employer. The contributions get accumulated in the provident fund in the name of the employee. The contribution of the employer is 12% of the basic wage plus dearness allowance or DA.

The employee makes an equal contribution. However, note that if you work in an organization, where the number of employees is less than 20, then under the rules of the rules of the Employees’ Provident Fund Organization (EPFO), the body which manages the scheme, the contribution of both the employee and the employer is restricted to 10%.

In most cases, for those working in the private sector, it’s the basic salary on which the contribution is computed. For instance, if your basic monthly salary is Rs. 30,000, then contribution by you and your employer would be Rs. 3,600 each (12% of basic).

Read also : How is provident fund calculated – Know the Process

Higher voluntary contribution

Note that you can make a higher contribution than the stipulated 12% of the basic pay. The contribution made comes under the ambit of Voluntary Provident Fund (VPF). However, in such a scenario, it’s not mandatory for the employer to make an equal voluntary contribution.

Employee Provident Fund

Employee Provident Fund or EPF is a scheme that provides retirement benefits to salaried employees in private sector companies with more than 20 employees. The EPFO is the Employment Provident Fund Organisation that manages EPF. The organisation mainly handles three schemes: the EPF Scheme 1952, the Pension Scheme 1995, and the Insurance Scheme 1976.

For every employee drawing a salary of less than Rs. 15,000 per month, it is compulsory to be a member of EPF. Once you are a member of the EPF scheme, you cannot opt out. You can easily calculate your EPF amount with the help of an EPF calculator.

What is an EPF Calculator?

An EPF calculator is an online calculator that helps you to find the exact amount of money that will be accumulated in your EPF account. All you need to do is visit the EPF calculator page, enter your current age, basic monthly salary and dearness allowance, and your contribution to EPF account with accrued interest. The EPF calculator will tell you the exact amount that will be available to you at the time of retirement.

What Are The Important Factors Related To EPF Contribution?

• EPF contributions are taken equally from both the employee as well as the employer every month.
• Around 8.33% of your employer’s monthly contribution goes to the EPS that will help you to get a pension after your retirement.
• It is compulsory to link your Aadhaar number and bank account with UAN.
• You can choose a nominee for your EPF who will receive the account balance in case of your demise.
• In case you want to change the nominee, you must submit Form 2 to the Finance department of your company.
• In case you want to leave your current job and withdraw balance amount from the EPF account, you must give a strong and valid reason to do so.

How To Check Your PF Balance?

Step 1. Visit the government’s EPF portal

Step 2. Select the location of your PF office, like state, regional branch office.

Step 3. Fill in your personal information and the EPFO account number shown in your payslip in the online form.

Step 4. Submit the form after verifying the provided details

Step 5. If all the records provided by you are valid, then you will receive the EPF balance as an SMS on your registered mobile number.

How To Transfer EPF Money Online?

Step 1. If you are planning for a job change, then EPF can be transferred using the Universal Account Number (UAN), which remains the same

Step 2. Go to the official EPF member portal and complete the registration

Step 3. Log in once you get the login credentials

Step 4. Visit the Online Transfer Claim Portal and request for EPF transfer using the same login details as above

Step 5. If you are eligible to make the transfer claim online, then you can do it without having to submit Form 13

Step 6. Click ‘Request for Transfer of Funds’ and enter your old employment details as directed

Step 7. Get it authenticated by your previous or new employer

Step 8. After entering the details, you will receive a PIN on your mobile

Step 9. Use the tracking ID generated for you to track your application.

Benefits of EPF

1. You will receive a fixed amount on your retirement

2. You enjoy insurance cover under EPF

3. You can nominate your dependant from your family to receive the balance PF amount in the event of your demise.

Incentive for women employees

In a bid to provide incentive to women employees and supplement their take-home salary, the Government of India in Budget 2018 brought down the contribution of the women employees to 8% during the first 3 years of their employment, as against 12% or 10% depending upon the establishment’s type.

However, there will be no change in the contribution of the employer. It will remain the same – 12% or 10%.

Online PF calculator

There are many online PF calculators that help you calculate your PF amount. On most PF calculators, you need to input details such as:

• Your current age and the age when you want to retire
• Your basic monthly salary and the average annual expected increase
• You and your employee’s contribution and the applicable rate of interest, as confirmed by the administration

PF gives you a financial back up when you hang up your boots. It helps you meet post-retirement expenses with ease. Since PF is calculated on basic salary, take a close look at your salary structure to know the basic. The higher the basic, the greater is the accumulated corpus.

FAQs

1. Does the EPF calculator help to monitor EPF returns?

The EPF calculator shows you the funds that accumulate in your EPF account at the age of retirement. You can check if they are sufficient. If you need a higher amount, then you can increase the contribution.

2. What interest rate does the EPF calculator uses to calculate the retirement corpus?

The EPF calculator uses the interest rates that are set by EPFO for the current financial year.



DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.