Employer Provident Fund India – Get to Know the Basics

Provident Fund (PF) is an employee-employer contribution based social security and retirement benefits scheme in India. It is governed by the Employees Provident Fund Organization (EPFO). Employee Provident Fund (EPF) is a retirement savings plan in India where both the employer and employee contribute a fixed percentage of the employee’s salary to the employee’s provident fund account.

What is Employer Provident Fund?

Employer Provident Fund (EPF) is a retirement savings plan in India where both the employer and employee contribute a fixed percentage of the employee’s salary to the employee’s provident fund account. The employer’s contribution is 12% of the basic salary, while the employee’s contribution is 10% of the basic salary.

Who is Eligible for Employer Provident Fund?

Employees in India with a salary of more than Rs. 15,000 per month are eligible for Employer Provident Fund. The EPF scheme is applicable to all industries, including the private sector, public sector, and government sector.

How Does Employer Provident Fund Work?

Employer Provident Fund works in the following way:

• The employer contributes 12% of the basic salary to the employee’s EPF account.
• The employee contributes 10% of the basic salary to the employee’s EPF account.
• The employer also contributes 3.67% of the basic salary to the employee’s EPF account.
• The employer and employee contributions are deposited in the employee’s EPF account.
• The employee receives interest on the amount deposited in the EPF account.
• The employee can withdraw the amount in the EPF account at the time of retirement.

Advantages of Employer Provident Fund

Employer Provident Fund has the following advantages:

• The employer and employee contributions are tax-exempt.
• The employer and employee contributions are eligible for tax deductions under Section 80C of the Income Tax Act.
• The employee can withdraw the amount in the EPF account at the time of retirement.
• The employee can avail of a loan against the EPF account.
• The employee can transfer the EPF account from one employer to another.

Disadvantages of Employer Provident Fund

Employer Provident Fund has the following disadvantages:

• The employee is not eligible to withdraw the amount in the EPF account before the age of retirement.
• The employee cannot withdraw the entire amount in the EPF account at the time of retirement.
• The employer and employee contributions are not eligible for tax benefits after the retirement of the employee.
• The employee is not eligible to withdraw the amount in the EPF account in case of death of the employee.

Conclusion

Employer Provident Fund is a retirement savings scheme in India where both the employer and employee contribute a fixed percentage of the employee’s salary to the employee’s provident fund account. The scheme has several advantages, such as tax-exempt contributions and tax deductions, as well as several disadvantages, such as the inability to withdraw the amount before retirement and the lack of tax benefits after retirement. It is important to understand the scheme and its benefits in order to make informed decisions about retirement savings.