The EPF Scheme stands for Employees’ Provident Fund Scheme. It is a retirement savings scheme in India for salaried employees. The Fund is managed by the Employees’ Provident Fund Organization (EPFO) as per the Scheme framed under EPF & MP Act, 1952.
Employee:
Is a person who appointed/engaged in a company or factory and getting salary for the works done for the company/factory.
Employer:
Is a person who appoints/engages persons for the works in his company/factory and when appointed they will become employees of that company/factory.
Rate of contribution:
The employer will deduct 12% of basic wages and dearness allowance of the employee. The employer will also contribute 12% of the same and total of 24% of basic wages and dearness allowance. The employer has to pay the said 24% to EPFO for maintenance of the fund as per the Scheme framed by the Government of India.
The Fund (EPF) paid to EPFO will earns interest as per the rate of interest declared by the Government of India as per the recommendations of EPFO. The rate of interest declared in the most of the times is more than 8% and compounded on monthly basis.
The EPF can be withdrawn fully by an employee after attaining the age of 58 years or unemployed for a period of 2 months. The EPF can also be withdrawn partially for education, marriage, medical treatment, site purchase, house purchase/construction, etc.
Benefits in continuing as EPF Member:
If EPF is withdrawn after age of 58 years with a service of 5 years (in all companies) or more, the amount withdrawn with interest is tax free as per the Income Tax Rules. Further no financial institution is offering an interest rate of at least 8% which is compounded monthly. In the initial stages of accumulation, it appears as small amount but in the long run it will become a huge amount by the time of retirement as it compounded monthly.
Conclusion:
Kind advice to all EPF members that don’t withdraw amount from EPF unnecessarily until and unless if it is for emergency purposes.