An individual employed and drawing a salary will in all probability hold an EPF account and this account is mandatory for those employees drawing a salary below Rs 15,000 per month and optional for those drawing above this limit.
Below are some of the most frequently asked questions regarding the EPF
A) Yes. Any person drawing a basic salary and dearness allowance of less than Rs 15,000 per month has to mandatorily contribute to the EPF and any person drawing the basic salary and dearness allowance above this limit can opt to contribute to the EPF.
The opting out of the scheme should be done at the start of a career and once opted in, contributions are mandatory. Many people still tend to contribute to the EPF because any salary that does not go into EPF increases the in hand salary and hence increases the amount of tax to be paid.
It also helps build a corpus to secure post retirement income
A) The contributions made towards EPF is eligible for tax deduction under section 80C
A) The contribution of the employee towards the EPF is 12% of the basic salary while the employer contributes 3.67% towards EPF, 8.33% towards the Employee’s Pension Scheme, 0.5% towards the Employees Deposit Linked Insurance,
1.1% as EPF administration charges and 0.01% as EDLIS administration charges
A) The current interest rate on EPF is 8.75% p.a. which is compounded yearly and the interest is calculated only on the EPF and not on EPS aspect.
So only the contribution of the employer to the EPF plus the employee’s contribution to the EPF generates interest and no other aspect such as EPS, EDLIS and administration charges can earn interest
A) The EPF is meant only for employed persons whereas the PPF or Public Provident Fund is designed for self-employed people. An employed person can opt for a PPF but a self-employed person cannot opt for an EPF.
PPF allows contributions to be made 12 times a year subject to a minimum amount of Rs 100. The EPF does offer higher interest rates at 8.75% p.a. but the PPF only offers interest of 8.70% p.a.
The PPF has higher loan options that allows withdrawal of up to 50% of the balance starting either from the 4th year or the 6th year onwards. EPF is more long term and is to be invested for a period till retirement or resignation whereas the PPF has a mandatory 15 year period and can be renewed for 5 year terms after that.
PPF amounts cannot be used for paying off debts but can be used for cases of income tax evasion.
A) The following link (http://www.epfindia.com/site_en/KYEPFB.php) allows users to register their details on the website and receive alerts on the EPF balance through SMS or individuals can visit http://uanmembers.epfoservices.in/ and register themselves to receive a passbook.
The EPF passbook is available 48 hours after a request and displays balance of EPF account and the contributions made by employee and employer.
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