New Delhi: The monthly deduction from your by your employer is contributed to your retirement savings in the Employees’ Provident Fund (EPF) Account. This money along with interest accumulated on the same is handed over to the employee upon retirement.

The EPF or PF is retirement scheme managed by the government’s Employee Provident Fund Organisation (EPFO), which is a statutory body formed under Employees’ Provident Fund and Miscellaneous Act, 1952.

The scheme covers every company which has 20 or more employees working for it subject to certain terms and conditions. These companies should be registered under the EPF Act to make contributions under the fund. If a salaried persons’ pay including ‘Basic’ and ‘Dearness Allowance’ is less than Rs 15,000 then it is mandatory for them to open an EPF account. However, for people who get more than Rs 15,000, are categorised as ‘non-eligible employee’ and it is not mandatory to become a member. However, such persons can voluntarily become members.

Contributions by employees and employers

The employer contribution is 12% of the employee’s basic salary, dearness allowance, and retaining allowance. The employee’s contribution is the same as an employer. However, if the company employs less than 20 people than the contribution of both employer and the employee is capped at 10%.

Benefits of EPF account other than retirement savings

The EPF retirement savings scheme offers tax exemptions under Section 80C of the Income Tax Act.

In the event of the death of an employee who is also a regular contributor to his EPF account, the family of the member will be given the benefits of Insurance Scheme 1976 (EDLI). The family member will be eligible to get an amount up to 20 times the salary of the EPF account holder under the scheme. However, this insurance payout is capped at Rs 6 lakh.

The EPF scheme also offers a lifelong pension scheme under the Pension Scheme 1995 (EPF). EPF Pension or Employees’ Pension Scheme (EPS) is a social security scheme provided by the EPFO. Under this, salaried employees who worked for at least 10 years are eligible to get pension after their retirement at the age of 58 years. EPS was launched in 1995 and existing members can avail the same.

Although the interest rate on EPF has consistently come down from 8.80% in 2015-16 to 8.50% in 2019-20, it is still a lot higher than that being provided by banks instruments such as Fixed Deposits (FDs). The rate of interest given by the government on  EPF corpus of beneficiaries is decided by the government every year.

Source:- timesnownews