Employee Provident Fund (EPF) is required to provide wider benefits to the workers on the compl...
Employee Provident Fund is one of the most popular and promising tools for investment as well as for retirement planning. A statutory body governs employee Provident Fund under Ministry of Labour and Employment, Government of India called as Employee Provident Fund Organization. This regulatory body supervises this tax-free social security scheme to benefit retiring employees by providing provident fund, pension, and insurance scheme.
Here in this article, we will discuss various benefits of the provident fund concerning the employed class:
Employees’ Provident Funds Ordinance was promulgated on 15th November 1951 for benefiting employees after retirement. Since its inception, this act has been amended for 15 times.
All the organizations employing 20 or more employees are eligible for this social security scheme. Any person engaged in Government, Public or Private sector is qualified to get the benefit of this scheme. Currently, the rate of interest on employee provident fund is 8.55% which is five-years low.
Employee Provident Fund was framed with the intention to provide financial stability and security to retiring employees. An Employer is liable to contribute towards provident fund on a regular basis once an employee joins the organization. Here both employer and employee contribute @12% of employee’s wages towards Employee Provident fund.
Provident fund is a tax-free interest amount which secures constant growth of employee’s money. Longtime investment of provident fund can ensure meeting of employee’s requirements including his retirement goals.
Provident fund amount has various benefits to employed people to secure their future after retirement and even during the tenure of their service. Multiple advantages of provident fund amount are as below:
This amount contributed receives to the employee after retirement in the form of pension. This pension amount is associated with a number of years of service and remuneration withdrawn by the employee at the time of employment. A retiring employee can also receive lump sum EPS amount along with the provident fund amount, which generally depends on last withdrawn average salary and duration of service as well as the department.
Furthermore, provident fund amount if withdrawn after five years of continued service is not taxable, unless the employee gets termination from the service due to some reason.
As per the coverage, the registered Nominee will get a lump-sum insurance amount in the event of the death of an insured person during the period of his service. Recently, the minimum insurance amount limit has been increased to Rs. 2.5 lakh from Rs. 1.5 lakh before. The maximum insurance amount a person can get is Rs.6 lakh.
Similarly, employee can withdraw an amount up to 36 times the monthly salary cum Dearness Allowance in case of home renovation or construction. Moreover, employee can take advantage of PF in the event of major surgery or severe disease. In this case, employee can withdraw up to 6 times of his monthly salary or entire provident fund amount.
Moreover, up to 50% of the said deposits are invested in government securities, money market instruments, etc. Nevertheless, the government is working on investment in other major sectors so that provident fund deposit can earn more interest to help employees.
Provident fund, a tax-exempted social security scheme, is one of the most promising investment plans for retiring people. But the government needs to make some new provisions concerning the interest earned on provident fund amount which is only 8.55% to secure the future of retiring people. Longtime investment of provident fund amount ensures meeting of employee’s requirements including his retirement goals.
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