Do you have any idea what PF is? Have you ever invested in PF? Well, PF stands for the compulsory contribution both you as an employee and your employer make towards the future benefits of you and your family. PF is basically designed to safeguard you and your dependents from financial hurdles in the post-retirement period. An employee needs to make 12% of his/her basic salary as monthly contribution towards PF account. PF contribution is mandatory for an employer/organization which has more than 20 employees. PF contribution comes under the ambit of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and is handled by the Employee Provident Fund organization (EPFO), a statutory body of the Government of India.
PF is one of the best investment tools all employees working in government, public and private sector organizations can invest in. If you want to live your retirement days in comfort, it’s important you make regular contribution towards your provident fund account.
What is a PF Calculator?
A provident fund calculator is an online tool by which you can calculate your EPF interest which you would receive from the central government at the time of your retirement. Basically, a PF calculator is an investment assessment tool that helps you assess your investments in employee provident fund schemes. PF amount calculator will not only help you know the interest on your PF funds, it will also provide you with an estimate of how much balance you would have in your employee provident fund account when you retire.
Key information to be put in PF interest calculator
An employee should enter the following information in a PF interest calculator to know his/her PF interest:
- Current age of an employee.
- Current EPF balance.
- Age of retirement.
- Monthly basic pay.
- Monthly dearness allowance.
- Monthly EPF contribution in percentage
- Expected salary hike.
Once you put all the above information in the PF calculator, it will reveal the total interest you would receive at the time of retirement. EPF calculation is, therefore, made easier by EPF calculator.
Provident fund interest rate
Before heading towards EPF calculation, an employee should be aware of the following things:
- Usually, the central government periodically notifies the rate of EPF interest rate
. The EPF interest rate notice is available on the official website of EPFO, India. The following are the interest rates of the last 3 fiscal years:
- Fiscal Year 2015-16 - 8.8%.
- Fiscal Year 2016-17 - 8.65%.
- Fiscal Year 2017-18 - 8.65%.
- Based on an employee’s monthly average balance, EPF interest amount is calculated. Employee provident fund contributors will receive interest on their PF contribution as well as employer’s contribution towards the same.
- Although, PF interest is calculated on a monthly basis, the total interest amount is credited on an yearly basis.
- The credit payout is usually done at the end of March.
- EPF accounting year starts from February and ends in March.
Tax Benefits on EPF contributions
An employee can get tax benefits for contributing to provident fund accounts under section 80C of the Indian Income Tax Act, 1961. This benefit can be availed for contributing up to Rs. 1 lakh to a PF account. If you contribute for an employee provident fund account for 5 years, you will escape tax deduction on the amount you have contributed. But, if the duration of your EPF contribution is less than 5 years and your withdraw your PF contribution before it completes 5 years, income tax will be deducted at source (TDS).
Basic things you should know about EPF and EPS calculations
- EPFO has made PF deduction mandatory, if your monthly salary is less Rs.15,000.
- You as an employee contribute certain amount of your monthly salary towards Employee Pension Scheme (EPS) which you would receive as pension after retirement. A minimum contribution of Rs.1000 has been decided as monthly pension amount for EPF account holders. You can also calculate your provident fund pension contribution by using a PF Pension Calculator.
- An EPF account contributor can nominate any one of his family members as nominee. In case, something unfortunate happens to the EPF contributor, the nominee will receive an insurance coverage up to Rs. 3,00,000. Earlier, Rs.1.56 lakh was allotted as insurance coverage. An employee should make sure he/she informs the nominee about this provision.
- The minimum contribution made by an employee towards his/her provident fund account should be 12% of his basic salary. Earlier, the minimum salary limit for EPF contribution was Rs. 6,500. But now, it has been raised to Rs. 15000. For example, if your monthly salary is Rs.15000 and you contribute 12% of your basic salary towards your provident fund account, your monthly PF deposit will be Rs.1,800. Your employer will be contributing Rs.550 and Rs.1,250 towards EPF and EPS respectively on a monthly basis.
EPF and EPS contributions made by employees/ employers
An employee can apply for EPF withdrawal or transfer, if he/she is jobless for two months after leaving the previous job. If you join a new company, it’s advisable you transfer your EPF to your new employer at the time of joining, instead of withdrawing it.