Learn about your and your employer's EPF contributions

In today's world, where inflation is constantly rising, securing your retirement is critical. You will find many retirement-related schemes on the market. But the safest among all is the Employees Provident Funds (EPF). EPF requires both you and your employer to contribute a set amount to your EPF account. This amount accumulates over time, and you can withdraw the lump sum amount that includes interest earnings after retirement.
 
You are probably wondering how much PF is deducted from your salary. Scroll down to learn about it and a few other pieces of information about EPF. 
 

Construction of EPF

EPF is not a single scheme. It consists of three plans that serve different purposes -
 

• The first component of EPF has accumulated retirement benefits. Under this, wealth grows over time.
• The second component is the Employee Pension Scheme (EPS). It will provide you with a pension once you reach 58 years of age.
• The last one is the Employee Deposit Linked Insurance Scheme (EDLI). It is essentially a life insurance policy that will assist your family after your death.

 
No separate enrolment or contribution is required to avail these schemes.
 

Who is covered by EPF provisions?

 
Before delving into EPF deduction rules, you must first determine whether they apply to your company. Let's look at the EPF rules.
 

• It applies to organisations that fall under the purview of EPFO.
• Any company with more than 20 employees must enrol in this scheme. Employers with fewer than 50 employees may voluntarily participate in it.
• Contribution to this scheme is mandatory if your basic salary plus dearness allowance totals less than Rs 15,000 per month.
• If you earn more than Rs 15,000 per month, you can choose to contribute to this scheme voluntarily.

 
Also Read: EPF Advance vs. Personal Loan: Which is Better?
 

How is EPF calculated?

 
As previously stated, the EPF contribution amount includes payments from both you and your employer. Here is how it works.
 

Employer contribution to PF:

The total employer's contribution to the PF account is 12%. However, this percentage is split further. Out of the total, 8.33% is contributed towards EPS, with the remaining 3.67% going to EPF. That is, if your monthly income is Rs 15,000, your employer will contribute Rs 550 to your PF account each month.
 

Employee contributions to PF

If you are an employee covered by EPF, you must contribute 12% of your basic monthly salary plus dearness allowance to your PF account. It means that if you earn Rs 15000 per month, your contribution will be Rs 1800.
 
The total contribution towards EPF, if your salary is Rs 15000, would be Rs 2,350. 
 

What will happen if you stop contributing towards EPF?

If you change jobs to a company where the EPF provisions do not apply, or if you leave your organisation to start your own business, your contribution to the PF ceases. Your account will become dormant if no contributions are made for three years in a row. However, this does not imply that you will lose your funds. The funds will keep earning you interest until you reach 58 years.
 

What are the provisions related to EPF withdrawal?

 
EPFO allows for both partial and total withdrawal. The later can be done in any of the three scenarios listed below.
 

• If you turn 58.
• If you have been out of work for at least two months.
• If the PF account holder dies prematurely, the nominee will receive the accumulated corpus.

 
You can also withdraw a portion of the accumulated funds in certain circumstances. These include medical emergencies, higher education, marriage, land acquisition, home loan repayment, and a few others. However, different provisions apply to different situations involving partial withdrawal.
 
Also Read: EPF Balance Check Online on Mobile, SMS, Call, Umang App
 

To conclude 

EPF secures your retirement. The funds you deposit earn 8.10% per year in interest. The rates, however, are subject to regular revision. Furthermore, the interest mentioned here is calculated monthly. If you work in an organisation that follows the EPF rule, 12% of your monthly salary will be deducted from your PF contribution. However, keep in mind that there are several conditions that you need to meet if you wish to withdraw this fund before retirement. But don't worry because debt products such as personal loan are always available to assist you in times of crisis.