Employees provident fund is a collection of funds between the employee and the employer. As of now the employee’s contribution to this fund is 12% of the basic salary, and the employer contributes 3.67%. The contributions then earn a fixed interest as set by the EPFO.

The withdrawal process of this accumulated fund is totally tax-free, i.e. the contributed fund as well as the interest received on the fund are exempt from tax. This fund can be withdrawn by the employee post-resignation or by the nominee/legal heir in case of the death of the employee.

What is the eligibility criteria for an employee?

Any salaried employee who is a resident of India is liable to be a member of the employee provident fund scheme. The employee is liable for this scheme right from the first day of his/her joining to any job. Once the employee becomes a member, he/she is accountable for provident funds benefits along with the insurance and pension benefits.

It is mandatory for employees having a salary of Rs. 15,000 or more to be a member of this scheme although the employee can voluntarily apply for it at any wage. The employee contributes a minimum 12% of salary (can voluntarily contribute more).

What is the eligibility criteria for the employer?

An employer is exempt from EPF scheme registration if the total employment of the organisation is less than 20 employees. An employer can also get an exemption if maximum employees voice their consent over the exemption although the latter case involves certain conditions and requires a lot of formalities. But in case, the total employees are more than 20 then it becomes mandatory for the employer to register for the EFF scheme.

Applying for the EPF scheme

To apply for an EPF scheme one needs to do it through the employer. The employee needs to provide all previous employment details (if any) through Form 11.

Benefits of registering in this EPF scheme

EPF schemes come in handy for those who do not have the know-how for financial investments. One can withdraw 90% of the accumulated amount if he/she is unemployed for a period of 60 days or if the person is nearing retirement.

Though a person can withdraw the entire amount at the age of 58. For women, this scheme has an added benefit as the government has decreased the EPF contribution to 8% in a bid to increase the take-home salary.

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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