Employees Provident Fund Advantages

Sponsored Links

Important Things To Know About Employee Provident Fund

Employee Provident Fund is crucial since it offers finances to meet necessities in the future when you finally retire from employment. In the case, you do not make it to old age and die somewhere down the line, your family may use this money to meet their expenses in life. Often, people fall short of cash in times of emergencies and during those times, borrowing from your EPF account may be an option.

The contributions towards EPF are statutory as prescribed by the Law. Organizations that have more than 20 employees should ensure employees have the EPF account and contribute towards the fund. A provident fund account holder is able to accumulate the contributions plus interest, which they can withdraw upon resignation, death, or retirement.

PF Account                 Benefits of EPF                 EPF Online

In case of death of the EPF account holder, the family can benefit from the funds. At times, partial withdrawals although not advisable, may be done depending on specific situations for example, when you want to meet high education cost, illness expenses, or construct a dream house.

Any person being employed by a company or employer who is governed by EPF & MP Act should submit a declaration to their employer to show if they are already a member of the Provident Fund. This allows the employer to continue remitting contributions for the fund. In the event that an employee was a member before, they should apply for Form 13 so as to get the old account information and balance brought to the new account.

A person who changes job can apply for the transfer of their EPF to the new organization they are joining. If an employer defaults payment for contribution as mandated by the EPF & MP Act, recovery may be done by way of penalty. The penalty is applied depending on the period of default for example, if the default for payment for the contributions by an employer has lasted for less than 2 months, a 5 percent penalty applies and if it has taken six months and above, a 25 percent penalty applies. This penalty is intended to help employers keep their records clean towards contributions.

When an employee resigns from a company, they need to make a decision on how their provident fund investment should be treated. There are three options that a person can make and each has its own advantages and disadvantages. The person can cash in the fund, which in most cases, is not a viable option unless one has attained the retirement age, and feels that they cannot work anymore.

The person can preserve the benefits in way of transferring it to an approved retirement fund. When you join another company, you can transfer the EPF account to the new organization you joined. In withdrawing the EPF amount, there is a limit where it is considered tax-free but when it surpasses that limit, various taxes may apply to the amount.

It may be tempting to take advantage of the tax-free cash withdrawals before retirement when one has resigned from the job; however, it may not be good. In case of EPF, the operative term used is “retirement” meaning an investor should do all possible to preserve the benefits until that time of retirement so that they have sufficient funds to meet their monetary needs. When you continuously dip into the retirement savings after changing jobs, you will run a risk of depleting the retirement financial kit.

Provident Fund Account

Sponsored Links

Should You Tap On Your Provident Fund Account Before Retirement

 A provident fund is intended to offer a long-term benefit when you retire. It is designed to offer you financial security when you retire. It is therefore not advisable for you to tap on your PF account until that time you retire. This ensures that when you enter the golden days, you have something that can keep you surviving.

In any person’s life, retirement planning is an important goal failure to which it can spell disaster to the person. At old age, it is most likely that you do not have a stream of revenue that can sustain you during those times. It is also a period when people tend to have ailments such as chronic diseases that may require extra medical care.

EPF Advantages             Benefits of EPF              EPF Online

If you are ill prepared in your retirement, you may have difficult times with finances. However, often people tend to tap into your provident fund accounts for one reason or another. There may be no need to say that one cannot withdraw from their provident fund, because sometimes emergencies do strike and there is no other option where one can get cash.

It only becomes logical if you are tapping on your PF account to fund emergency cash needs, otherwise, if you are doing it not for such purposes, you may be causing harm than gain to yourself. The amount should be utilized after someone retires or stops working or when their earnings have been depleted.

For other emergencies, before one withdraws from their PF account, they should exhaust other avenues such as liquid funds, debt funds, or savings accounts. The returns on PF are higher than inflation and in addition, they are tax-free. When you withdraw from the PF, it subjects you to the following consequences.

Your retirement may go haywire:

You may not be able to save enough in your PF if you are tapping on it. Therefore, when the retirement age comes, you may have little to take you through the golden years. You need to weight the retirement planning benefits and the need to withdraw from your PF before that age.

You could lose the tax-free status:

When you dig into your PF account, you may be excluded from the tax-free status because that cash cannot be put back. When you lose the tax-free status, it means you may begin to be taxed and this could eat the savings kit you have put in your PF.

Withdrawing from your PF may be viewed as a classic case of not having a holistic approach in your financial decisions and lack of prioritization. When people tap into their PF, it forces them to push their retirement age or make higher contributions to strengthen their retirement kit in the last years before they are laid off.

Sponsored Links

In short, you may only withdraw from your PF if you have a pressing need for cash and you can prove that. You also need to realize the situation you are putting yourself into because you could disorientate your retirement savings completely and suffer during the old age. There are stringent rules applied when one wants to withdraw from the scheme before retirement.

Previous post:

Benefits of EPF

Sponsored Links

What Are The Benefits Of Employee Provident Fund: 

Employee Provident Fund forms an important tool for retirement planning. When the PF account is contributed for a long period, it can provide a person with a considerable amount of cash they can use when they retire. The person can also withdraw part of the contribution based on specific expenses in times of emergencies as defined by the regulations and which include higher education, house construction, illness, and marriage among others. Here are some of the ways in which PF account holders can benefit from the fund.

Employees are entitled to the pension:

In an Employee Provident Fund, there are two elements that people need to know. There is the Provident Fund itself and Employee Pension Scheme that was put in place in 1995. While the PF account holder contributes 12 percent of basic and daily allowances, which goes to the provident fund, on the other hand, part of the 12 percent contributed by the employer, about 8.33 percent goes to the Employee Pension Scheme up to a maximum of Rs. 541 of which the rest is topped on the provident fund account.

EPF Advantages               PF Account                EPF Online

To receive the pension benefits, a person should have attained the age of 58 years and has completed 10 years in service without making the withdrawal. Should you retire before you are 58, there are provisions that allow you to get your pension but the amount is reduced. In addition to that, your family may be entitled to the pension in case you die before that period as long as they meet the specifications put in place.

Insurance benefit:

According to Employee Deposit Linked Insurance scheme, in case an organization does not offer group insurance scheme to employees, it is mandated to contribute about 0.5 percent of the basic monthly pay as a premium towards life insurance cover. While for some people, it may seem a small amount, in others, it can help their families survive.

Other special benefits in which EPF can help:

Whenever emergencies arise, it is likely that a family may be compelled to tap into their EPF account, but there are limitations into this. The funds may be used to meet education and marriage. You can take up to 50 percent of your contribution to meet marriage or education expenses. You can also tap this benefit by withdrawing three times in your life. An EPF account holder will need to show prove that they have been in service for not less than 7 years in addition to providing valid documents of fees payable and marriage card.

You may withdraw the EPF account to meet expenses for constructing your dream house, doing repairs and maintenance, as well as paying for a house loan. In case, you have taken a home loan and want to make repayments using this fund, you can take advantage of up to 36 months wages from the balance as long as you have completed 10 years being in service.

In the event that you are undergoing a major surgery operation or you suffer from leprosy, TB, cancer, paralysis, heart ailment, and mental derangement, you may tap into your EPF account to meet the medical bill. You may take up to six times equivalent of your salary or the entire funds you have made to date, depending on which amount is less.

Sponsored Links

EPF – Employees Provident Fund

Sponsored Links

What Is Employee Provident Fund: 

Employees’ Provident Fund (EPF) is an investment scheme designed for salaried people in India. A statutory body operating under Ministry of Labour and Employment, and which is called Employees’ Provident Fund Organization is mandated to administer social security schemes as prescribed in the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. The social security schemes include Pension, Insurance, and Provident Fund offered to industrial employees.

Employees who have opened a Provident Fund account are able to benefit from the scheme. All establishments employing 20 or more workers should allow their employees to have the Provident Fund accounts.

Employees’ Provident Fund is among the main platforms that allow employees in the Public and private sectors to save their earnings. The scheme came into existence after setting forth the Employees’ Provident Funds Ordinance on November 15, 1951, following which it was replaced by Employees’ Provident Funds Act, 1952. Today, this act is referred to as Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 and applies to the entire of India except in Kashmir and Jammu.

EPF Advantages              PF Account               Benefits of EPF

The Bill on Employees’ Provident Funds was tabled in Parliament in 1952 as Bill number 15 of that year. Its aim was to provide a body of provident fund serving employees in factories and other workplaces. Since it was enacted, the Act has undergone 15 amendments.

Through the Employees’ Provident Fund Organization, employers are able to get online services thereby enjoying transparency, comfort, and efficiency. In recent times, a new online service was established to help members transfer their provident fund accounts online from one organization or employer to another.

For instance, if an employee switches his or her job, he or she can easily transfer their provident fund account online in case both organizations are governed under the EPF & MP Act 1952. The PF account transfer is also available for employers. Before applying for transfer of provident fund account, both employers and employees should keenly read the guidelines.

A Provident Fund helps create financial security and stability among employees. Employees can secure their future finances by opening a PF account. An employee should start the contributions to this fund when they join a company or are employed. The contributions allow the employees to contribute a portion of their salary in every month so that they save an amount, which they can use in case they are temporality out of work, they retire, or when they are no longer fit to work.

Both the employer and employee contribute 12 percent of the employee wage, which goes to the fund under the account of the employee. The employer also makes contributions towards the administration of benefits provided under the EPF & MP Act.

An employee, when joining the savings scheme needs to execute a nomination. The employees should fill the EPF Member Registration Form, the Returns Form, and the Claims Form. The contributions, which employees make towards their PF accounts, are invested as defined by the Pattern of Investment. The balances in their accounts earn them interest depending on the rate that is declared annually by the Government. The tax-free interest, as well as maturity award, ensure that an employee has a good growth of their money.

Sponsored Links