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Provident Fund (PF) is a retirement benefits scheme for salaried professionals designed to provide them with enough funds after retirement. It is a combined contribution from employees and employers that is deducted from the employee’s monthly salary and deposited in their PF account. Over time, it grows into a sizable amount the employee can redeem after retirement. Every corporate firm with over 20 employees must sign up for an Employees’ Provident Fund. Read on to find out more about what is provident fund and how PF is calculated on salary each month.
Employees Provident Fund (EPF) is a retirement benefit programme that the Employees Provident Fund and Miscellaneous Act of 1952 covers. Employees contribute a specific amount to the programme, and employers must match the same contribution each month. The EPFO or Employee Provident Fund Organisation is responsible for overseeing the scheme. The employee gets a lump sum PF payment at retirement and during the service tenure, including both parties’ contributions and the interest. The PF amount and the interest gained are not taxable when withdrawn, making it a desirable scheme for salaried employees.
The scheme covers all corporate firms with over twenty employees. It also covers some companies with less than twenty employees, though with some exemptions and restrictions. For instance, a firm’s contribution is 10% less if its industry is jute, coir, beedi, brick, or guar gum and has less than twenty employees. The EPFO reviews the EPF interest rates each year. Those who need to learn how to calculate PF amount must understand that the organization calculates the interest rate on each month's ending balance and then for the entire year after the interest rate announcement.
The UAN, or Universal Account Number, is a unique identification number assigned to every member of the Employees' Provident Fund Organization (EPFO) in India. It serves as an umbrella for multiple Member Identification Numbers (Member IDs) allotted to an individual by different employers. The UAN remains constant throughout an employee's career, streamlining EPF management. This centralized system enhances transparency and accessibility for employees to access their EPF accounts, check balances, and manage withdrawals conveniently through the EPFO portal.
Also Read: How to Withdraw Your PF Using the Pandemic Option?
These contributions accumulate over time and are invested in various financial instruments such as government securities, bonds, and equities.
Aspect | EPF (Employee Provident Fund) | EPS (Employee Pension Scheme) | EDLI (Employee Deposit Linked Insurance) |
Purpose | Provides retirement savings to employees. | Provides pension benefits to employees. | Provides life insurance coverage to employees. |
Contribution | Both employer and employee contribute. | Only the employer contributes. | Only the employer contributes. |
Eligibility | All salaried employees in India. | Members of the EPF. | Members of the EPF. |
Contribution Limit | Varies (typically up to 12% of salary). | 8.33% of the employer's contribution. | 0.5% of the employee's basic salary per month. |
Benefit | Lump sum withdrawal upon retirement. | Monthly pension after retirement. | Lump sum payment to the nominee in case of death. |
Example | An employee contributes 12% of their salary to EPF, and the employer matches this contribution. | An employer contributes 8.33% of the employee's salary to EPS. | An employer contributes 0.5% of an employee's basic salary to EDLI. |
Note: Please note that the percentages and contribution limits mentioned in the table are indicative and may vary based on regulations and individual circumstances.
Example
EPF (Employee Provident Fund):
The employee contributes 12% of their salary to EPF, which amounts to Rs. 6,000 (12% of Rs. 50,000).
The employer also contributes 12% of the employee's salary to EPF, which amounts to Rs. 6,000.
EPS (Employee Pension Scheme):
The employer contributes 8.33% of the employee's salary to EPS, which amounts to Rs. 4,165 (8.33% of Rs. 50,000).
EDLI (Employee Deposit Linked Insurance):
The employer contributes 0.5% of the employee's basic salary to EDLI, which amounts to Rs. 250 (0.5% of Rs. 50,000).
Schemes offered under the EPFO (Employee's Provident Fund Organization):
The Indian government sets up rules to calculate the funds to be allocated to the EPF account. Need to know what PF account number is? It is assigned to an account where the employees and the employers deposit the PF amount. Each employee’s PF comprises two types of contributions: the employee's and the employer's contributions.
Contribution By | Contribution Per Month |
Employee | 12% |
Employer | 12% |
Total Contribution | 24% |
Those who want to know how to calculate PF must follow these steps to determine the total amount they will receive at retirement:
Also Read: EPF Balance Check Online on Mobile, SMS, Call, Umang App
The organization determines the month-wise closing balance after notifying the financial year’s interest rate. One can simply calculate the annual interest by adding up the running month's balance, multiplying it by the interest rate, and dividing it by 1200.
For example, if an employee earns a basic salary of RM 10,000 per month and the EPF contribution rate is 11%, the employee's contribution to the EPF would be RM 10,000 x 11% = RM 1000 per month
There are three circumstances under which you can withdraw 100% of your EPF:
Here are the conditions under which EPF withdrawals are permitted, offering employees flexibility and support in managing their financial needs.
There are several types of provident funds, each serving different purposes and administered by various entities.
These forms streamline different processes within the EPFO system, ensuring efficient management of provident fund accounts. Below is a tabular representation of EPFO forms and their purposes:
Form | Purpose of the Form |
Form 2 | For nominating and declaring |
Form 5 | For Registering |
Form 5 IF | For availing a claim under the EDLI scheme |
Form 10C | For availing withdrawal benefits or scheme certification. |
Form 10D | For availing monthly pension. |
Form 11 | For transferring the EPF account. |
Form 14 | For purchasing an LIC policy. |
Form 15G | For availing tax-saving benefits on interest. |
Form 19 | For settling employees' provident fund. |
Form 20 | For settling employees provide a fund in case of death. |
Form 31 | For EPF withdrawal. |
EPF is a retirement scheme that ensures that employees receive sufficient funds during their retirement period. Anyone working for a government or private organization can take advantage of the scheme. After knowing what PF is, one would also want to know the benefits it offers.
According to Section 80C of the IT Act 1961, employed professionals can receive tax advantages of up to ₹ 1.5 Lakh for PF account contributions. However, employees cannot deduct taxes from their contributions if they make them to the EPF account for under five years. The income tax is withheld at the source if the contribution period is less than five years or if the employee removes the PF contribution before that period.
To be eligible for the Employee's Provident Fund (EPF), an individual must be fulfill the following eligibility mentioned below:
To claim the PF online you need to follow the steps mentioned below:
Hope this article explains what the PF number is and other queries related to PF, including how to calculate PF on salary. So, open your PF today and enjoy its various advantages, while securing your future. If you need money in an emergency, instead of withdrawing money prematurely, get a personal loan online at a competitive interest rate through an instant personal loan app.
1. How is PF calculated in salary?
PF is calculated based on a fixed percentage of salary.
2. Can I withdraw my PF?
Yes, you can withdraw your PF under certain conditions.
3. Can I withdraw 100% of PF?
No, you cannot withdraw 100% of your PF balance. Partial withdrawals are allowed for specific purposes like retirement, education, etc.
4. Can I check my PF balance?
Yes, you can check your PF balance online through the official portal or by sending an SMS to the designated number.
Disclaimer: This website is for educational and information purposes only. All content mentioned is not professional advice and is not guaranteed to be accurate, complete, reliable, current or error free.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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