The Employees’ Provident Fund or EPF is almost as old as the Republic of India. It is the country’s earliest social security scheme that was legislated in 1952, soon after the newly independent country’s Constitution was adopted in 1950. It has been designed as a guaranteed return, tax-free instrument for the accumulation of funds for the post-retirement years of an employee.
The deduction of contribution from the employee’s salary, the obligation to contribute to the EPF corpus by the employer, how the employer’s contribution will be split up between a provident fund account and a pension corpus are all determined by legislative provisions.
A close look
In order to determine the sort of returns EPF will generate at the time of retirement, one has to know several parameters.
These are: the age of the employee, the retirement age, the monthly contribution of the employee, the balance in the EPF account now, the contribution of the employer, the rate of growth in the EPF contribution, the current balance in the pension fund and the rate of interest.
EPF interest rate
The employee contribution of 12% of the basic salary goes into the EPF.
It is the employer’s contribution that is divided into EPF and the pension account – 3.67% goes into the EPF, while 8.33% is put into the pension fund.
The employer also supposed to bear three small amounts – the Employees’ Deposit Linked Insurance Scheme (EDLIS), and administration charges of EPF and EDLIS.
EPF pension
The formula for calculating the monthly pension amount is (pensionable salary X pensionable service period)/70.
The interest on EPFO is calculated after the EPFO determines the rate of interest. It is done every year. The opening balance at the beginning of every financial year is added to the contributions to the EPF account during the year and then the sum is multiplied by the rate of interest announced.
How to check EPF details
The balance, interest paid and other details of the EPF passbook are available for anyone to check by typing the UAN (Universal Account Number) in the Umang app. Account balance can also be seen by a SMS or missed call.
UAN is a unique 12-digit number given to each EPF member.
EPF: The significance of Employees’ Provident Fund remains undiminished even amidst a growing equity cult in India. One should know how it ensures safe, high returns through the very long term. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
