Before discussing facts related to Provident Fund, let us discuss What is Provident Fund?
Every month a part of your basic salary that is around 12% goes into the EPF account, and an equal amount is contributed to the account by the employer. It is a scheme which saves money for your retirement and applies to all employees, especially the one who whose basic salary is less than 15000/month.
There are various benefits associated with EPF like you can get the pension after you retire, you can withdraw money at the time of crises, etc.
How can you become a part of EPF? To be a part of EPF all you have to do is become a part of an organization that is covered under EPF. Generally, if 20 or more employees are working in an establishment, then it is certain that EPFO will cover it.
Apart from the above information, there are these facts related to Provident Fund that one must know.
1) Check EPF balance online
In this modern era where our life revolves around the internet, how can we forget the significant role that it plays when it comes to checking EPF balance.
Yes, you can check PF balance anytime and from anywhere to keep yourselves regularly updated. There are different ways like SMS alerts, missed call or the EPF mobile app via which you can check the balance. It’s necessary for you to keep track of it every month, so make sure you utilize it correctly.
2) Virtual Provident Fund
Virtual Provident Fund is basically the extension of Provident Fund. Now when you already know that 12% of your basic salary goes into EPF account let me bring in a twist.
You can even contribute more than 12% in the EPF account if you wish to. However, the employer contribution will remain the same.
3) Transfer of PF online
Yes, you can always transfer PF amount online, and reason could be any may be a job change. Transferring the amount, in this case, is necessary because it is a very tedious process to handle multiple PF accounts and also after three years of noncontribution you stop receiving interest on the amount present in your old account.
And a crucial thing to note here is that if you withdraw money from your PF account due to job change then it’s illegal as per law.
In fact transferring the amount has become comfortable through Universal Account Number (UAN).
4) Withdrawal of 100% PF only after leaving the job
No, I am not changing words, I am still abiding by the fact that I mentioned earlier. You can only withdraw money at the time of retirement.
However, there are exceptional cases where you can withdraw the amount even before your retirement, and that is when you remain unemployed at for two months after your job change or at the time of unfavorable conditions like medical emergencies.
5) You can create a nominee for the amount in your PF account
In extreme situations like death, there has to be someone to whom you would wish to transfer all the amount present in your PF account. And you can nominate a person for the same through the help of Form no. 2
However, in cases where no nominee is chosen, issues while claiming of money could occur.
6) EPF includes EPS
Now you must be thinking what EPS is. So, EPS is Employee Pension Scheme which helps you to attain pension.
As now we know 12% contribution is made by the employer out of which 8.33% goes to EPS. This means a part of your employer’s contribution makes up your pension which you can avail only after completing ten years of service. No amount is taken from employees contribution to pay pension to the employee.
The pension can be as low as Rs 1000/month or as high as Rs 3250/month.
7) No rights of employers over PF
It is often believed that employers have the hold over EPF. However, this is not true.
Once an employer deposits his contribution into employee’s PF account, he can never get it back. Therefore the employer just acts as an authenticator and facilitator.
8) You can opt out of EPF
Few of them know this fact that if you don’t wish to contribute to PF, then you can opt out of it but the condition is this that your salary should be more than 15,000. Also if once in your life, you have opted for EPF and you have your PF account number then you cannot opt out of it.
So going up for EPF is a decision that you must take at the beginning of your job.
9) Tax Benefits associated with EPF
The contribution made by the employer in EPF is exempted from all taxes, but the contribution made by an employee is taxable. However, the employee can still claim tax deduction under Section 80C of Income Tax which says that the money that you initially invest in EPF, the money that you receive as interest and the money that you withdraw after five years are all exempted from income tax.
10) Premature Tax Withdrawal Reverses Tax Benefit
The minimum period for which you need to invest in EPF continuously is five years in order to avail tax benefits.
And if in case you withdraw the amount before five years then the withdrawal would become taxable in the same financial year.
Earlier if you believed that EPF is a faulty scheme then by now you must have got to know its importance and various benefits that it provides to us.
Also, I am certain you didn’t know most of these facts earlier.
But now when you are aware of them I hope you will follow them diligently and make maximum benefit of it.
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Ankur Aggarwal is a Digital Marketer, Entrepreneur, Traveler, Blogger, Foodie. Have been blogging since 2010. In 2016 he scored 99.2 percentile in XAT Exam for MBA, left that to pursue his Online business dreams. He has multiple websites but incomeboy.com is his new venture. The purpose of Incomeboy is to pass on 100% accurate and genuine information on making and saving more money in India. Write to him at firstname.lastname@example.org.