Provident Fund – PF Interest and the Prime Benefits

Last Updated at: January 10, 2020
423
Provident Funds - PF Interest and the Prime Benefits

Good Financial support? Secured future? These things concern almost every individual working in the organized sector. Right? To ease this out, the Employees’ Provident Fund Organization introduced the Employees’ Provident Fund and Miscellaneous Act under which the EPF Scheme was started in 1952.

Under this scheme, both the employer and employee contribute an equal amount of money every month, which is credited into the employees’ accounts every month. A specific interest rate as set by the EPFO is also provided on the amount.

The amount so deposited, is free from all the taxes of the Government and can be withdrawn by the employee after their retirement or can also be withdrawn in the form of ‘Advances’. The complete process is managed and put-forth by the EPFO (Employees’ Provident Fund Organization).

online pf registration

PF Interest and Contributions

Any organization having more than 20 employees have to register themselves with EPFO.

12% of the salary of the employee along with an equal amount of contribution by the employer takes place. But, only 3.67% of the amount contributed by the employer and 12% of the amount contributed by the employee is transferred into the EPF account. This happens when the salary is more than 15,000 INR.

The employer contributes the remaining 8.33% amount towards the EPS (Employees’ Pension Scheme). In case, the salary is equal to INR 15,000, then, INR 1,250 will be deposited to the EPS, i.e., 8.33% of the basic salary.

Though the employer and the employee contributes the amount every month, the amount of contribution of interest takes place at the end of each year according to the EPFO’s Interest Rate. The current rate of interest as per the financial year 2018-19 is 8.65%, unlike 8.55% of the annual year 2017-18. This rate of interest fluctuates every year and the guidelines of EPFO decides it. One can calculate the total amount at the end of each year as follows:

The opening balance of the previous year + the monthly contributions + total interest on the previous balance and contributions. The account becomes inactive if there have been no contributions or activity for the past 3 years, following which no interest will be credited on the collected amount.

Voluntary Provident Fund (VPF)

In case the employee wants to save more, they can make extra contributions by opting for the Voluntary Provident Fund, on which they shall receive tax-free interest. It is optional and is accounts separately.

Withdrawing Amounts from the EPF Account

When the employee leaves the job or has certain emergencies, they can withdraw the amount by filling in the specific forms. After retirement, the individual can easily withdraw the full amounts along with the interests that have accumulated over the years but only after the age of 55 years.

If the individual quits the job before turning 55, they will receive 90 per cent of the amount in case of immediate withdrawal after quitting. But if one claims the withdrawal after 60 days, they can receive the full amount. You can do it by filling in the “UAN based Form 19”.

Advances for Employees and how can they be availed?

It is not always necessary to wait until retirement to withdraw the collected sum. In the case of emergencies and need, these can be withdrawn in the form of “advances”. It is where the deduction of money takes place from the calculated amount easing the pressure of taking a loan. Payment of interest is not necessary on these “Advances” and neither is it necessary to repay this amount.

The withdrawal of the advances follows the below circumstances:

  • Home loans
  • Purchasing a home
  • Medical emergencies
  • Educational Requirements
  • Marriage of children

Understanding the needs of the employees, in the new rules, the EPFO has allowed the employees to use 90 per cent of their accumulated amount to purchase a house or to submit the down payments for the same. The condition for availing this scheme is that the individual must have been a member of the Provident Funds for a total of 3 years or more.

Condition for availing the benefits of interest and withdrawals

Universal Account Number (UAN): In order to obtain interests on the amount contributes, the employee must have their UAN. It acts as a unique ID for the members which remains the same all throughout their employment time. Also, it has to be used for availing benefits as well as withdrawing the amounts after retirement.

Conclusion

As such, according to the statistics, there has been a constant increase in the interest rates of the Provident Funds. And it keeps on fluctuating every year, as per the EPFO. But, these Provident Fund amounts are equally important for the future security of the individuals.

Provident Fund – PF Interest and the Prime Benefits

423

Good Financial support? Secured future? These things concern almost every individual working in the organized sector. Right? To ease this out, the Employees’ Provident Fund Organization introduced the Employees’ Provident Fund and Miscellaneous Act under which the EPF Scheme was started in 1952.

Under this scheme, both the employer and employee contribute an equal amount of money every month, which is credited into the employees’ accounts every month. A specific interest rate as set by the EPFO is also provided on the amount.

The amount so deposited, is free from all the taxes of the Government and can be withdrawn by the employee after their retirement or can also be withdrawn in the form of ‘Advances’. The complete process is managed and put-forth by the EPFO (Employees’ Provident Fund Organization).

online pf registration

PF Interest and Contributions

Any organization having more than 20 employees have to register themselves with EPFO.

12% of the salary of the employee along with an equal amount of contribution by the employer takes place. But, only 3.67% of the amount contributed by the employer and 12% of the amount contributed by the employee is transferred into the EPF account. This happens when the salary is more than 15,000 INR.

The employer contributes the remaining 8.33% amount towards the EPS (Employees’ Pension Scheme). In case, the salary is equal to INR 15,000, then, INR 1,250 will be deposited to the EPS, i.e., 8.33% of the basic salary.

Though the employer and the employee contributes the amount every month, the amount of contribution of interest takes place at the end of each year according to the EPFO’s Interest Rate. The current rate of interest as per the financial year 2018-19 is 8.65%, unlike 8.55% of the annual year 2017-18. This rate of interest fluctuates every year and the guidelines of EPFO decides it. One can calculate the total amount at the end of each year as follows:

The opening balance of the previous year + the monthly contributions + total interest on the previous balance and contributions. The account becomes inactive if there have been no contributions or activity for the past 3 years, following which no interest will be credited on the collected amount.

Voluntary Provident Fund (VPF)

In case the employee wants to save more, they can make extra contributions by opting for the Voluntary Provident Fund, on which they shall receive tax-free interest. It is optional and is accounts separately.

Withdrawing Amounts from the EPF Account

When the employee leaves the job or has certain emergencies, they can withdraw the amount by filling in the specific forms. After retirement, the individual can easily withdraw the full amounts along with the interests that have accumulated over the years but only after the age of 55 years.

If the individual quits the job before turning 55, they will receive 90 per cent of the amount in case of immediate withdrawal after quitting. But if one claims the withdrawal after 60 days, they can receive the full amount. You can do it by filling in the “UAN based Form 19”.

Advances for Employees and how can they be availed?

It is not always necessary to wait until retirement to withdraw the collected sum. In the case of emergencies and need, these can be withdrawn in the form of “advances”. It is where the deduction of money takes place from the calculated amount easing the pressure of taking a loan. Payment of interest is not necessary on these “Advances” and neither is it necessary to repay this amount.

The withdrawal of the advances follows the below circumstances:

  • Home loans
  • Purchasing a home
  • Medical emergencies
  • Educational Requirements
  • Marriage of children

Understanding the needs of the employees, in the new rules, the EPFO has allowed the employees to use 90 per cent of their accumulated amount to purchase a house or to submit the down payments for the same. The condition for availing this scheme is that the individual must have been a member of the Provident Funds for a total of 3 years or more.

Condition for availing the benefits of interest and withdrawals

Universal Account Number (UAN): In order to obtain interests on the amount contributes, the employee must have their UAN. It acts as a unique ID for the members which remains the same all throughout their employment time. Also, it has to be used for availing benefits as well as withdrawing the amounts after retirement.

Conclusion

As such, according to the statistics, there has been a constant increase in the interest rates of the Provident Funds. And it keeps on fluctuating every year, as per the EPFO. But, these Provident Fund amounts are equally important for the future security of the individuals.

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