If you are a salaried employee in India, you would know that every month a certain amount of money is deducted from your salary as PF (provident fund). While it may be annoying that you are not able to spend your hard-hard money, it is vital to know why is it deducted and how does it benefit you?

What is employee provident fund scheme?

Employee Provident Fund is a retirement savings scheme that the government of India has mandated for all salaried employees. The funds deducted from your salary as PF goes to your PF account, which is maintained by the Employee Provident Fund Organization. All organizations in India that have more than 20 employees, as per law, is mandated to register with EPFO. In simple words, it is a savings platform provided by the government to help the employees build a corpus for post-retirement life.

How much money is deducted as PF?

As per the EPFO rules, a minimum of 12% of the basic salary is deducted from the employee’s salary, which is deposited in the EPF account. The employer contributes an equal percentage. While, the full 12% of the employee’s contribution goes into the PF account, only 3.67% of the employer’s contribution is directed to PF account, the remaining 8.33% is paid towards the Employee Pension Scheme (EPS).

It is important to note that, EPF remains active till you continue to remain a salaried employee. If you switch jobs, it is paramount that you update the EPF information with the new employer so that they can continue the contribution.

How is the interest calculated on PF?

As per the figures on the official EPF website, the interest rate applicable on the PF is 8.75%, which is paid annually. The compound interest is paid on the opening balance (the amount accumulated till the date of computing) every year on 1st April.

Is there any tax benefit on EPF investment?

Yes, under Section 80C of the Indian Income Tax Act, the interested earned on the EPF investment, and the amount you eventually withdraw from the PF account is exempted from income tax. Also, the employer contribution to your EPF is tax-free.

How to check the EPF balance?

The process to check EPF balance is very simple. You can check all your PF-related details online on the EPF website. With the introduction of the Universal Account Number (UAN), you can check your PF details on the EPF website by entering your UAN details.

Learn more about your Pension Plans here.

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.



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