Are you a salaried employee? If you are – you would know what the employee provident fund is. Did you know that a portion of your salary goes into this fund (that is – only if you work in an organization with more than 20 people)? This might seem like you are aimlessly giving away some part of your salary. But, that is not true. This money will come in really handy for your retirement. Your retirement plan needs to be part of your savings starting from your 20s. This fund can do you good and come in part of your retirement fund. Here is everything you need to know about an EPF and also the benefits it will offer you.
What is the Meaning of Employee Provident Fund?
There are various things that an employee working in a corporate setting would like to know about the Employees Provident Fund (EPF). The Employee Provident Funds and Miscellaneous Provisions Act of 1952 governs the primary plan. The Employees’ Provident Fund Organization is in charge of the plan (EPFO).
It applies to every business employing 20 or more employees, and it also applies to some organizations, subject to specific restrictions and exclusions, even if they employ fewer than 20 people.
An employee must contribute a specified amount to the EPF plan, and the employer must also contribute an equivalent amount. On retirement – the employee receives a lump sum payment that includes both the employee’s and the employer’s contributions, as well as interest on both.
How Does an EPF Work?
Every month, both the employer and the employee contribute equally to the EPF account under this arrangement. The employer, on the other hand, is responsible for depositing the entire sum into the EPF account. The employee’s portion is usually withheld from their monthly pay.
An employee needs to have a Universal Account Number (UAN), which is assigned by the EPFO, for all such EPF transfers. The UAN serves as a central repository for multiple Member IDs assigned to one individual by several employers. The goal is to link an individual’s numerous IDs under a single number.
Here is everything you need to know about EPF Claims, objectives, EPFO claim status, and much more.
When Does EPF Apply?
All businesses with a minimum of 20 employees are required to participate in the EPF scheme. Within one month of reaching workforce strength, the employer must register with the EPF.
Even if a registered establishment’s staff strength falls below the required number, the act’s rules and regulations continue to apply. Voluntary registration is also available for businesses with less than 20 employees. EPF will be available to all employees of such a business from the commencement of their employment.
What are the Core Objectives of EPF
The EPF’s main objectives are as follows:
- Each employee should be given their own EPF account.
- Compliance must be made as simple as feasible.
- Ensure that organizations follow all of the EPF’s invariably issued rules and regulations.
- It is vital to ensure that internet services are reliable while simultaneously improving their capabilities.
- Online access is required for all member accounts.
- The period it would take to settle a claim will be reduced from 20 to three days.
- Two significant goals are promotion and voluntary compliance promotion.
How Much Will you Contribute to an EPF Account?
The contribution rate for most employees, excluding HRA, is 12 percent of their fixed salary. As an employer, you must make an equal contribution to the EPF account. There are some instances where a 10 percent rate is appropriate. If a company fits the following conditions, for example:
- There are fewer than 20 employees.
- Has had losses that exceed its total net worth.
- Belongs to the industries of beedi, brick, jute, or guar gum.
- It is a sick industrial business that the Board for Industrial and Financial.
- Reconstruction has been designated as such (BIFR).
The EPF account receives the entire 12% of an employee’s pay, whereas the employer’s contribution is split between the following:
- 8.33% to the EPF account
- 3.67% to the EPF account
Benefits of EPF Accounts
The following are the advantages of the EPF plan:
- It aids in long-term financial planning.
- Making a single, lump-sum investment is not required. Employees’ salaries are deducted on a regular frequency, which allows them to save a significant amount of money over time.
- It can assist an employee in a financial emergency.
- It aids in the saving of money for retirement and the maintenance of a healthy lifestyle.
Have you thought about withdrawing your EPF? It is mentioned right here.
How to Claim EPF Sums?
You must make sure that your Universal Account Number is activated and linked to your KYC before withdrawing EPF online (Aadhaar, PAN, and bank details). After this, you can withdraw your money with the help of the online portal. If you want to do it offline, you can visit the respective EPFO office.
One of the key points you need to keep in mind is – to make sure you know your UAN and all of your details are correct. Now, you know all of the benefits that come along with your employee provident fund, and the best you can do is enjoy it.