All About Employee Provident Fund and its Importance
Updated On Nov 20, 2021
Table of Contents
The Employees Provident Fund Organization (EPFO) of India, a statutory agency under the Labour and Employment Ministry of the Indian government, established the EPF. Employee and employer contributions go into an employee provident fund. Both the employee and the employer are required to contribute to the EPF system on a monthly basis. As an employee, you will receive this money when you retire or if you stop working temporarily or permanently owing to a disability.
It stipulates that any organisation (regardless of its structure) with 20 or more permanent employees (distributed across several departments and branches, whether in the same location or not) working in any of the EPFO's 180+ industries must register with the EPFO.
What Does EPF Include?
The EPF is made up of several different programmes. It actually consists of three separate systems, each with its own set of goals.
- Your retirement benefits are accumulated in the first section of the EPF. This is the portion of the programme that generates wealth.
- EPF's employee pension scheme is the second component (EPS). The goal of EPS is to provide a pension for employees who reach the age of 58.
- The Employee Deposit Linked Insurance Scheme, or EDLI, is the third and final component of the EPF. It is a life insurance plan.
Eligibility of EPF
Following is the eligibility criteria guiding EPF
- According to current regulations, any company with 20 or more employees must register with the EPFO and give EPF benefits to its employees. Organizations with less than 20 employees, on the other hand, can join the EPF programme on a voluntary basis.
- Employees with a monthly income of up to Rs. 15,000 are also required to participate in the EPF scheme, according to the rules.
- Anyone can join the EPF programme later, but unless they join a future company or a startup that is not registered under the EPF Act, they will not be able to opt out.
Significance of EPF
Here is how your EPF can come in handy:
1. Functions As An Emergency Fund
This fund can be used to cover any life's unexpected events. For any unusual circumstances, the employee might withdraw a portion of the fund.
Employees can access their PF account via the EPF member portal using their Universal Account Number (UAN). When individuals move jobs, they can transfer their PF account.
3. Acts As A Support System In Cases of Unemployment
This funds can be utilised to cover the employee's expenditures if he loses his job. After one month of unemployment, one can withdraw 75% of the accrued funds. After two months of unemployment, the remaining 25% of the fund can be taken.
EPF provides valuable interest rates in addition to being one of the best retirement planning tools. In terms of taxation, it is exempt-exempt-exempt. It's also a low-risk instrument because it's backed by the government, has a pension, and is a highly handy way to save. After all, you won't be doing much. You fill out some paperwork, and the rest is taken care of by your HR or payroll department.
Therefore, it is an easy scheme to enroll in and has numerous benefits for you.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.