EPF(Employee Provident Fund): Calculation, Benefits, & Comparison

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Hiral Vakil

EPF
EPF Calculation
Tax Saving Investments

Employee Provident Fund (EPF) is nothing but a savings scheme for employees.  Every month a portion of your salary is deducted towards EPF. This fund can be availed when you are unable to work or when you retire.

EPF Calculation

Employee’s Contribution to PF: 12% of your Basic Salary + DA (Comes out of your Salary).

The Employee Contribution goes entirely towards the EPF Scheme.

Employer’s Contribution to PF: 12% of your Basic Salary + DA (Comes out of your Employer’s Pocket).

The Employer Contribution gets split up as follows:

EPF Tax Benefits 

Employee’s contributions to EPF is tax-deductible under section 80C, while the employer’s contribution is completely tax-free. Any withdrawal after the specified period (5 years) is exempt from income tax.

Want to know what other tax deductions you can claim?
Read our article to understand the different types of tax deductions available to you and how to avail them.
Read More
Want to know what other tax deductions you can claim?
Read our article to understand the different types of tax deductions available to you and how to avail them.
Read More

EPF Rate of Interest

An interest rate is determined by the government and central board of trustees. Any interest earned towards credit standing in one’s PF account is deposited on 1st April of every year. Historically PF has earned interest between 8% to 12%. For FY 2018-19 interest rate is 8.65%. Interest accumulated during employment is taxfree. 

Want to check your EPF balance?
You can read our article here for a step by step guide on how to check your balance.
Read More
Want to check your EPF balance?
You can read our article here for a step by step guide on how to check your balance.
Read More

Comparison of different tax saving investments

Investments Returns Lock-In-Period Risk
ELSS  12-15%* 3 Years Market Risk
FD 7-9 %*  5 Years Risk-Free
NSC 8% 5 Years Risk-Free
NPS 8-10%* Till Retirement Market Risk
PPF 8% 15 Years Risk-Free

All the above tax savings investment options are tax-deductible under section 80C up to INR 1,50,000. (*Subject to change)

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FAQs

Can an employee contribute to the EPF after leaving the service?

No, it isn’t possible to continue contributing to EPF once he/she has left the service. EPF mandates that an employer contributes the same amount as the employee. But since an Individual has left service, he/she cannot be deemed an employee.

What are the measures by which the PF amount is recovered from a defaulting employer?

In case your PF account is lost due to a defaulted employer, these are the ways in which you could recover it:
– Attachment of Bank Accounts
– Realization of dues from Debtors
– Attachment & Sale of properties
– Arrest and Detention of the Employer
– Action under Section 406/409 of Indian Penal Code
– Section 110 of the Criminal Procedure Code
– Prosecution under section 14 of the EPF & MP Act,1952

How a member is informed about the non-payment of contributions recovered from the wages of the employee but not paid to the EPF?

The Annual P.F. Statement of Account/Member Passbook will indicate the amount paid by the employer. The default period in a year is thus made known to the members. In the current scenario if the member has activated her/his UAN the non-payment/payment of contributions can be verified every month through the e-passbook. Currently, members also receive SMS on their registered mobile phones on credit of monthly contribution into their PF account.

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