What is EPF?
Every month a small part of the salary of the employee is transferred to the EPF or Employment provident fund. EPF is a government organization which was created to save up for the retirement of the employees. This is a compulsory scheme in which employee, as well as the employer, has to make some compulsory investment in the scheme. EPF scheme is regulated by Employee Provident Fund Organization or EPFO.
As per the rules of the scheme, an employee has to put 12% of the salary amount in the EPF and the employer has to match the same contributions. 12% of the salary will include Basic salary as well as Dearness Allowances. With the help of the contribution from your employer, you can make sure that you get the best returns for your investment in the later stages of your working. This contribution can make sure that you have the best retirement plan in place which can make sure that you get the best way to secure your future.
- pf contributions is mandatory for below 15000 monthly salary employees.
- The company that holds to 2o employees registering with epfo mandatory.
PF Contribution 24% of employee basic salary (emplyoee12+12-> employer) with some charges paid by the employer.
There are three Types of the Scheme Offered by EPFO India,
- EPF – Employee Provident Fund scheme (12% + 8.3%)
- EPS –Employee Pension Scheme. (3.6%)
- EDLIS (Employee Linked Insurance Scheme) (0.5%).
TDS Deduction on EPFO
The employees, those who have been participating towards EPF account from their earning, may require withdrawing an amount after leaving the work. In addition, if the worker withdraws EPF amount on or else later five years as well as the entire withdrawal is lower than fifty thousand INR, and then there will be no TDS deduction on that Cash. However, if the worker withdraws EPF amount earlier five years after the amount is equal to otherwise greater than fifty thousand then the TDS will be surely deducted at the source.
- So below 50,000 withdrawal no TDS as on 5/30/2016 in the term early 5 years.
- Early 5 years withdrawals are fully taxable as per IT section 80 C. IF PAN not submitted tax rate is 34.6%, if Pan submitted then 10% of the Tax.
- IF 15G or 15H Submitted No tax will be deducted. 15G (below 60 years) 15H (60+ years) available at income tax portal.
- After 5 Years No TDS.
- Employee Provident Fund is exempted from TDS (2016 budget issue)
how much of percentage of Pf deduction on monthly salary?
Ans: for only EPF Scheme 12% from basic salary for the employee.
Employee and employer contribution to PF Amount
- 12% (8.33% Epf + 3.67 EPS) from employer epf scheme & pension scheme,
- 3.6% of employer share for Employee Pension Scheme,
- Government 1.1 to 6% of total wages from September 2014,
- employee deposit linked insurance scheme: employee contribution 0.5% from total wages insurance benefit up to 3,60,000.
The Epf contribution will not exceed 15,000 INR Per month.
PF balance withdrawal limits:
- Employee pension Fund can available after completion 9.6 years of service and 58 years age.
- TDS On early 5 years withdrawals, Not allowed to withdraw full pf amount (only your contribution with interest).
loan against pf balance & interest rate
- You can take the loan from following cases education, marriage, Home / Plot (buy or renovate), To pay existing home repayment you have to wait minimum 10 years.
- For obtaining the Loan you have to complete 5 years of service.
- you can 24times loan amount based on your (basic salary and DA).
epfo interest rate this year
All the contributions which are made into the EPFO grow with a fixed rate of interest. The rate of interest for all the investments made in EPF is fixed by the government annually. The rate of interest of EPF for the financial year 2015-16 was set at 8.8% every year.
Note: The Interest rate on PF balance as per 2016-17 financial year is 8.75% / Year. better than saving & Fixed deposit account.
AY 2018-19 PF interest is 8.5%.
AY 2017-18 -> 8.7%.
The growth which is provided to the investors is because the EPFO invests the entire amount in fixed income instruments. By investing in Fixed Income Investment such as state and central government bonds, fixed deposits in banks, and also in bonds which are issued by public sector companies there is the complete security of the investment. Along with complete security, the return from the investment is also guaranteed. In the past few years, the importance of EPF investment has increased a lot. The main reason for the increase is the fact that until a few years back there was pension which was provided to the central as well state government employees. Over the last many years all these things have changed as the government does not offer pension now. People are very much dependent upon the money which they are receiving from EPF and are thus even increasing the investment in their EPF account.
How much EPF fund investing in Stocks?
There has been one major problem which has been closely associated with EPFO. To keep the money safe EPFO has always followed a very conversational approach for investment. Because of this method, the total growth to the amount is not as expected. Most of the times the amount received are not enough to best the current inflation. For many years experts have termed that as the investments made in EPF is long term, it would be better if the investment is made into equity. Keeping this demand in mind, EPFO has decided to start investing in equity. 5% of the total investment is going to be made in equity from August 2015.
EPFO has also started investing in the Exchange Traded Funds. The ETF investments in various assets such as bonds, commodities and stocks can provide better returns on the investments. Most of the ETF can track the index just like bond index or stock index. All these money is called as passively managed funds which can make sure that all the returns which come from these funds can be mirrored in the indexes which they follow.
There are many people who are not of the opinion similar to the EPF funds which are getting invested in the equities. As EPF is the retirement fund, they believe that these funds should not be invested in the equities as there is a risk followed by these investments. But as these investments are done for 5 to 7 years, investing in equity can help in providing better returns.
Employee Pension scheme was launched in the year 1995 and out of the total contribution of the employee, which is 12%,8% goes into the EPS (Maximum of Rs. 541).
The pension which one receives is subject to the number of service and average of salary which the person draws before retirement. The maximum limit to the pension is set up at 3500 P.M. There is also a provision where you can get lump sum amount from EPS along with your PF amount. There are many benefits of EPF schemes here are some of the top benefits.
epf scheme Insurance benefits
One of the biggest hidden benefits of EPF is that along with the retirement benefits it can also Insure you for your life. According to the EDLI scheme, any company which is not providing group insurance scheme has to provide 0.5% of the monthly salary which acts as the monthly premium for the insurance coverage.
EPF for special occasions
At times in life, there are special occasions or emergencies when you need some extra funds. During such times EPF can be very handy as it can provide you, family, a chance to withdraw a certain amount of money when you need to maintain some special conditions. Here are some of the situations in which you can withdraw the amount.
epfo Marriage or Education
If you need funds for the marriage of your child or for their education then EPF allows you to withdraw 50% of the fund as a contribution. Along with this, you can also take this benefit three times in your life, the only condition is that you need to be in service for 7 years. To get the money you are supposed to provide valid documents and proof of marriage or the fees which are payable.
- Getting a house
You can also withdraw EPF amount for the purpose of construction, maintenance and repair for housing loan and repayment. You can also use 3 months wages from the EPF balance for which you need to provide a proof of 10 years of service. You can also withdraw about 12 months of wages at one if you want to do the repairing and alteration of your house.
- Medical emergency
EPF can also be used for the purpose of money for surgical operations. You can withdraw money for leprosy, TB, Cancer, heart issue, paralysis and mental derangement. For medical issues, you can withdraw six times your salary.