Thursday, 20 October 2011

Employees Provident Fund, things should know.

Employees Provident Fund is a statutory and compulsory deduction from your salary and the deducted amount with employers share will be deposited in a recognized provident fund account for the welfare of the employee. A recognized provident fund account may be a government managed fund or the fund managed by private trusts of the organization as per Employee Provident Fund and Miscellaneous Provisions (EPF & MP) Act 1952. Whoever may manage the provident fund, but the rules are same and same benefit should be given to employees.

Benefits of Employees Provident Fund

The Employees provident fund is meant for the retirement needs of the employee those who have no any direct pension from the employer. The Employer also will contribute in the fund so it is called Contributory Provident Fund (CPF) also.

The amount contributed by the employee is exempted from income tax up to Rs. 100000 under section 80C of present income tax act.

The interest earn from Employees Provident fund is also exempt from income tax act.

You can earn 9.5% tax free interest (will be changed as per the policy of government) for both employees contribution and employers contribution.

As the interest is tax free you can earn 10.5%, 11.5% & 12.4% interest as per your tax slab, while consider with other taxable investments.

At maturity the total amount in your EPF account is tax free. But the employer’s contribution will be taxable, if the maturity is before completing 5 years in the same EPF account and if the PF account is not active.

This PF account will be a good contribution for your retirement and at the time of retirement you can invest it in any profitable investment schemes or any annuities and can earn a good regular income.

You can make conditional withdrawal of money from EPF account in certain emergencies such as marriage of children or siblings, higher education of children, purchase of a residential house, treatment specified illness etc., after a stipulated period starting your EPF account.

Things to remember by an EPF Subscriber

Nominate your spouse or children or any immediate relative to get back the money, if you die before withdraw EPF account.

Do not withdraw EPF account when you change your job. Just transfer your EPF account soon after you left your old employer. You can get the compound interest of your account balance and also the tax benefit.

You can contribute an additional amount monthly in EPF account up to 88% of your basic and this additional contribution is known as Voluntary Provident Fund (VPF). The employer will not contribute for the VPF portion, but you can earn the same tax free interest and tax exemption under section 80C up to Rs. 100000.

Make regular checking of your EPF status  to ensure that the employer is depositing the amount in time and the amount is properly crediting in your EPF account with proper interest. Now you can check your PF balance online also. Read step by step instructions to check EPF balance online.

Always keep these in mind about your Employees Provident fund account and secure your old age and retirement life.

Related articles

TDS from Premature Withdrawals of P F
Transfer your old PF account with previous employer to new one
P F Deduction Makes You Rich when Retire

1 comment :

  1. [...] Over fifty million subscribers of the retirement and pension body EPFO could get 8.6 per cent interest on their investment throughout 2012-13, more than 8.25 per cent provided within the last financial year. EPFO probably to provide 8.6% interest in 2012-13 to its subscribers of Employees Provident Fund. [...]