Employee’s Provident Fund (EPF) is a retirement benefit scheme that is available to all salaried employees earning more than Rs 15,000 per month. It is a savings platform that helps employees save a fraction of their salary every month that can be used upon retirement or unemployment.
The fund is maintained and overseen by the Employees Provident Fund Organisation (EPFO) and any company with over 20 employees is required by law to register with the EPFO. Earlier, if you were earning Rs 6,500 per month, it would have been mandatory for you to contribute a part of your income to your EPF. This amount was changed from September 1, 2014 and the ceiling for contributions was raised from Rs 6,500 to Rs 15,000.
Both the employees and the employers contribute 12% each of the basic wages and dearness allowance to the provident fund account. From the employee’s side, the entire 12% goes under the EPF account while from the employer’s side, 3.67% is contributed to the EPF account while the remaining 8.33% goes to the Employee’s Pension Scheme (EPS).
Currently the rate of interest on an EPF account is 8.65% per annum. According to the EPF withdrawal rules, you can get back your EPF money only under three situations—after the retirement age (which has been extended from 55 to 58), unemployed for more than two months, or death before retirement.
EPF also offers the nomination facility, that is, an employee can nominate his mother, father, spouse or children to receive the money in the event of the death of the employee. However, an employee cannot nominate his brother or sister to take their EPF money.
The EPF withdrawal amount is tax free only if you get it after retirement or have been working continuously for five year. However, you will be taxed if you withdraw your EPF money before completing five years of continuous service and if the amount is above Rs 30,000.
There are special provisions for women who have subscribed under EPF. Women who quit their job for getting married, or during pregnancy or childbirth will not have to wait for two months to withdraw and can do so immediately.
In last year’s budget, Finance Minister Arun Jaitley proposed levying an income tax of 60% on the final withdrawal of the total EPF amount. However, the government withdrew this proposal after facing a strong backlash from salaried tax payers.
Source: dnaindia.com