EMPLOYEE'S PROVIDENT FUND
EPF is also like retirement plan similar to PPF. But here apart from your own contribution, your company also contribute towards your retirement.
This is one of the best retirement scheme compared to other schemes.
What are the benefits of EPF?
1. Your's contribution
2. Employer's contribution
3. Interest on both contributions
Since all these are automatically exempted from your salary, this will help everyone for retirement.
How much you can contribute to the EPF?
12% of your basic salary.
Why my EPF amount is less than my actual EPF amount?
For Eg., if your basic salary is 30,000, the 12% of basic is equal to 3600.
But in your passbook, it may shown as only 1800 at maximum.
Since the employer's can restrict the EPF contribution to max of 1800(Basic equal to 15,000).
How much your employer will contribute to the EPF?
The same amount as yours, but some amount will go to the EPS scheme.
EPF - 12% of yours + 3.67% of Employer
EPS - 0% of yours + 8.33% of Employer
This is the reason there are two categories for Employer's Contribution in your passbook.
What is EPS?
Employee's Pension Scheme, post your retirement, a monthly pension will be provided.
What is the present interest rate for EPF?
8.5%.
Compare interest rates with other schemes?
PPF - 7.9%
SSY - 7.6%
How the interest will be calculated for EPF scheme?
EPF interest will be calculated on monthly's contribution.
Here is the formula to calculate EPF
Interest = Sum of monthly balance * Interest rate /1200
Closing EPF Balance = Opening balance + Contributions – withdrawal + Interest
Here, I have taken zero previous balance, basic salary as 15,000 and present interest rate.
How much you are investing per year, if your basic salary is 15,000?
Basic - Rs. 15,000
12% of yours - Rs. 1800
3.67% of employer - Rs. 551
Per year contribution = 28,206 rupees
Interest = 1299
Total = around 30,000
Note : As per above calculation.
What is the tax on EPF?
EPF is tax free (when withdrawn at retirement age)
But it will be taxed, if you withdraw within 5 years.
However, EPF will also fall under EEE category
E - No Tax on Investment
E - No Tax on Interest
E - No Tax on withdrawal
Shall I contribute to EPF more than 12%?
Yes. you can contribute upto 100% of your basic(termed as VPF)
About Voluntary Provident Fund(VPF)?
1. It doesn't include mandatory 12% of EPF. VPF is separate contribution.
2. Can contribute 100% of your basic. Max amount.
3. Lock in period of 5 years(Need to contribute for 5 years)
4. Eligible for only existing EPF employees
5. No Tax - EEE
6. Tax exemption under 80C(upto 1.5L)
7. Interest rate - 8.5%
8. It is not compulsory to contribute to VPF
9. Can withdraw at retirement or resignation.
10. Can transfer between companies.
11. Partial withdrawals in the form of loans.
12. If withdrawn before maturity, it attracts Tax.
13. Should be more than 12% of basic.
What is the retirement age to withdraw the EPF?
58 years
Shall I withdraw 100% of EPF amount?
Yes.
Just before one year of your retirement, you can with draw upto 90% of EPF amount.
I lost my job, am I eligible to withdraw the EPF?
If you lose the job,
After the first month, you can withdraw 75% of EPF amount
After the second month, you can withdraw 100% of EPF amount
If you withdraw within 5 years of continous contributions, you will taxed at 10% of withdrawal amount
How to check my present EPF balance amount?
There are several ways to check your EPF balance.
The simplest way to check your EPF balance is give a missed call to "011 2290 1406"
Pro Tip - Save this number as a contact.
Shall I avail a loan on EPF amount?
Actually EPF doesn't avail loans, it should call as partial/early withdrawals or EPF advances.
That means, you are withdrawing part of your EPF amount, and no need to pay back like in PPF.
Shall I withdraw EPF for my marriage?
There are different categories to withdraw your EPF.
- For Medical Emergency
- For Buying New Home/Construction
- For Marriage/Education
How much I can withdraw EPF for each of these category?
For Medical, you can withdraw 6 times of your basic
Terms and Conditions -
- No min years of contribution required
- and you should be hospotilized for more than a month
For Buying Home - 36 times of your basic
Terms and Conditions -
- Min 5 years of contribution required
- And only once you can withdraw
For Marriage/Education, you can withdraw 50%
Terms and Conditions -
- Min 7 years of contribution required
Is it a good practise to withdraw EPF?
It is highly recommended not to withdraw your EPF amount at any cost.
1. Since unlike PPF, this cannot be repay and add to your EPF.
2. Your total investment will break since you withdraw in mid of compounding interest, and cannot serve the purpose of retirement.
Compare the below two snippets,
On average, it will take 6 years to accumulate 2L, and withdrawing 1L in mid of tenure, you are losing interest on 3L.
What are the other alternatives?
If you have a PPF account, you can avail loan.
If you have a SSY account, it is time to claim your total amount.
Shall I withdraw amount contributed towards EPS?
Yes, upto 10 years.
Post that you cannot withdraw it.
What is the use of EPS?
EPS will help to provide the pension post your retirement.
But since your contribution towards EPS is very minimal, don't expect more from it.
How to calculate EPS amount?
Monthly Pension = (Your last EPS amount * no of years service)/70
Eg., If your last EPS amount is 1800 & no of years of service = 35,
Your EPS = 1800 * 35 / 70 = 600 per monthly
How to transfer my previous employer's EPF account to new employer?
- Login to https://unifiedportal-mem.epfindia.gov.in/
- Go to Online Services -> One Member One EPF
- You should know your Previous Employer Member ID or UAN(if already created)
- Enter OTP
That’s it. Your Transfer Request has been submitted.
Duly Sign this and submit to present company's HR.
How to check the Claim Status?
- Login to https://unifiedportal-mem.epfindia.gov.in/
- Go to Online Services -> Claim Status
To Check the Rejected Status of your claim,
- Navigate to the Passbook under View.
- Select the Employer/EPF Account No.
- Click on 'View Claim' Status.
How to withdraw EPF amount through online?
Although it is recommend not to withdraw EPF, please go through this link for the detailed steps
Quick Recap:
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Nice one useful stuff
ReplyDeleteThank you Raja Sekar. May I know, how to came to know about this site?
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