As an employee, contributing to the Provident Fund (PF) is one of the most common retirement saving options in India. The PF is a social security program that helps employees save a portion of their salary for their retirement years. Over the years, I have learned several lessons about the Provident Fund scheme. In this blog, I will share 12 Provident Fund lessons that I have learned.
1. What is the Provident Fund Scheme?
The Provident Fund scheme is a retirement savings scheme initiated by the government of India. The scheme is meant for salaried employees and is managed by the Employees Provident Fund Organization (EPFO). Under the scheme, both the employee and employer contribute a fixed amount to the fund every month.
2. Contribution to the Provident Fund Scheme
The contribution to the Provident Fund scheme is mandatory for employees earning a salary up to a certain limit. The employee’s contribution is deducted from the salary, and the employer contributes the same amount. The current rate of contribution is 12% of the employee’s basic salary plus dearness allowance.
3. Provident Fund Withdrawal
Employees can withdraw the accumulated Provident Fund balance after attaining the age of 58 years. However, under certain circumstances like retirement, marriage, education, and medical treatment, an employee can withdraw the balance before the age of 58 years.
4. Tax Implications of Provident Fund
The Provident Fund scheme enjoys tax benefits under Section 80C of the Income Tax Act, 1961. The contributions made by the employee and the employer are eligible for tax deductions up to a certain limit. However, the interest earned on the accumulated balance is taxable.
5. Interest Rate on Provident Fund
The interest rate on the Provident Fund balance is determined by the government every year. The current interest rate is 8.5% per annum, which is reviewed and revised annually.
6. Provident Fund Account
Every employee has a Provident Fund account with the EPFO. The account number is unique and remains the same throughout the employee’s career. It is essential to keep track of the account number and ensure that the contributions are credited to the correct account.
Also know about: How to register epf account for company?
7. Provident Fund Nomination
Employees are required to nominate a beneficiary for their Provident Fund account. In case of the employee’s death, the nominee is entitled to receive the accumulated balance in the Provident Fund account.
8. Transfer of Provident Fund Account
When an employee switches jobs, the Provident Fund account can be transferred to the new employer’s account. It is important to ensure that the Provident Fund account is transferred to the new employer to avoid the accumulation of multiple accounts.
9. Provident Fund Balance Check
Employees can check their Provident Fund balance through various online and offline methods. The EPFO has an online portal where employees can log in and check their balance. Additionally, the balance can be checked through SMS or by visiting the nearest EPFO office.
10. Provident Fund Withdrawal Process
The Provident Fund withdrawal process can be initiated through the EPFO online portal. The employee needs to fill out a withdrawal form and submit it online. The withdrawal amount is credited to the employee’s bank account after verification of the withdrawal application.
11. Transfer of Provident Fund Account after Retirement
After retirement, the employee can transfer the Provident Fund account to a Senior Citizen Savings Scheme account or a mutual fund. It is advisable to seek the advice of a financial planner before transferring the Provident Fund balance to other investment options.
12. Provident Fund Scheme for Freelancers
The Provident Fund scheme has been extended to freelancers and self-employed individuals. The scheme, called the National Pension Scheme (NPS), is a voluntary retirement savings scheme. Under the scheme, individuals.