Do you need to know more about the Employee Provident Fund (EPF)? Are you curious about the advantages and how to utilize it properly? If so, you’ve arrived at the correct spot. In this article, we will provide all the information you need to know about the Employee Provident Fund (EPF) and how it can be beneficial in the future. Let’s begin! Read on to discover more.
Definition of Employee Provident Fund
EPF is an essential saving scheme in India designed to provide financial security to employees. Both the employee and the employer make mandatory contributions to the employee‘s retirement fund. This enables the employee to accumulate a substantial amount of money which they can use in their retirement or other financial needs. In this article, we will discuss the key details of Employee Provident Fund (EPF).
Background of EPF
History of EPF
The Employees Provident Fund (EPF) was established in 1951 under the Employees Provident Fund Ordinance to provide social security to employees in Malaysia. The EPF Board is the main body responsible for administering the EPF, with the Bank Negara Malaysia (BNM) supervising its operations. The EPF is a mandatory savings scheme for all employees earning a minimum of RM1,000 per month. Since its establishment, the EPF has grown from strength to strength, with a total of RM711.1 billion in assets under management as of June 2020. It is the largest retirement fund in Malaysia, providing a safety net for employees when they retire.
How EPF Works
Employees contribute 11% of their monthly salary to the EPF, and employers contribute an additional 12%. This contribution is deposited into an individual’s EPF account. The EPF also offers additional benefits such as medical benefits, loan facilities, and withdrawal options. The EPF also provides a dividend rate of up to 6% per annum. This rate is determined by the EPF Board and is based on the performance of the funds. The dividend rate is then distributed to members based on their contributions. The EPF also allows members to make voluntary contributions to their accounts, which is subject to certain conditions. Members can also make withdrawals from their accounts for various purposes, such as buying a house, financing higher education, or medical expenses.
Benefits of EPF
There are few benefits of EPF such as tax benefit, Retirement, loan benefits, and death benefits. Let’s discuss them in brief.
A. Tax Benefits: Employees‘ Provident Fund (EPF) is a great way to save on your taxes as it is eligible for tax deductions under Section 80C of the Income Tax Act. The contribution to EPF helps reduce your taxable income, thus reducing your tax liability.
B. Retirement Benefits: EPF is an ideal tool for retirement planning as it offers a safe, reliable and tax–free return on investment. The amount saved in EPF can be used as a retirement corpus to take care of your expenses after retirement.
C. Loan Benefits: EPF also offers a loan facility to its members, which can be used for various purposes such as buying a house, financing a business, paying for a child‘s education, etc.
D. Death Benefits: In case of the death of the EPF member, the amount in the EPF account will be paid out to the family members as a lump sum. This money can be used to take care of any financial obligations that the deceased may have left behind.
Eligibility for EPF
Employees of any organization are eligible for EPF coverage if they meet the following criteria:
1. They must be at least 18 years old and employed in an organization with more than 20 employees.
2. They must earn more than Rs. 15,000 per month.
3. They must be employed for more than 6 months in the same organization.
4. They must not be a member of any other EPF scheme.
Employers are eligible for EPF coverage if they meet the following criteria:
1. They must have more than 20 employees and have been in operation for at least 12 months.
2. They must have paid wages to employees for at least 6 months in the same organization.
3. They must pay their employees at least Rs. 15,000 per month.
4. They must be registered with the Employees’ Provident Fund Organization (EPFO).
How to Contribute to EPF
The Employees‘ Provident Fund (EPF) is a government–run retirement fund that provides a secure way to save money for retirement. Contributing to this fund is a great way to ensure that you have a secure and comfortable retirement.
Employee Contributions: Employees can contribute to EPF by submitting their contributions on a regular basis. These contributions are based on the employee’s salary and the employer’s contribution rate. Employees can also make additional voluntary contributions, which can be used to build up their EPF savings even further. Employees can also choose to make partial withdrawals from their EPF savings for their retirement, education, buying a house and other needs.
Employer Contributions: Employers are required to contribute to EPF every month, based on the salary of their employees. Employers can also make additional voluntary contributions to their employees’ EPF savings, as part of their corporate social responsibility initiatives. Employers can also choose to invest the EPF savings of their employees in certain funds and other investment products, which can help to generate higher returns for their employees.
How to Withdraw from EPF
A. Partial Withdrawal: To make a partial withdrawal from your Employee Provident Fund (EPF), you will need to fill out a Form 31. This can be done online or in person, depending on the rules in your region. The form requires basic information such as your name, EPF account number, and address. You will also need to provide the reason for your withdrawal, such as medical expenses, marriage expenses, or education expenses. You will also need to provide proof of your claim. After submitting the form, it will be reviewed by the EPF office. If your request is approved, you will receive the amount you requested in your bank account.
B. Full Withdrawal To make a full withdrawal from your EPF account, you will need to fill out a Form 19. This form requires the same information as Form 31, plus an attestation from your previous employer. You will also need to provide proof of your identity, such as a passport or PAN card. After submitting the form, it will be reviewed by the EPF office. If your request is approved, you will receive the full amount of your EPF account in your bank account.
What benefits does the EPF provide?
The EPF provides a number of benefits to employees, including a guaranteed return on the contributions made, tax benefits, and a lump sum payment at the time of retirement. The EPF also provides death benefits to the family of the employee in the event of the employee‘s death.
How do I check my EPF balance?
You can check your EPF balance by logging in to the EPFO portal with your UAN number and password. You can also check your EPF balance by visiting the nearest EPF office, or by calling the customer service helpline.
How do I withdraw money from my EPF account?
You can withdraw money from your EPF account by submitting a form to the EPF office. You can also withdraw money from your EPF account online by logging in to the EPFO portal with your UAN number and password.
How long does it take to withdraw money from my EPF account?
It usually takes around 10–15 days for the withdrawal to be processed and the money to be credited to your bank account.
Is my EPF contribution eligible for tax exemption?
Yes, your EPF contributions are eligible for tax exemption under Section 80C of the Income Tax Act.
Is there a limit to the amount I can contribute to my EPF account?
The maximum amount you can contribute to your EPF account is 12% of your salary or Rs. 1,50,000 per year, whichever is lower.
Can I transfer my EPF balance to another account?
Yes, you can transfer your EPF balance to another account. You will need to submit a form to the EPF office in order to transfer your EPF balance.
EPF is an invaluable retirement savings plan for workers in India, providing financial security and peace of mind in the future. It has the added bonus of attractive tax benefits and competitive interest rates, making it the perfect choice for many employees. To get the most out of this scheme, it is important to be aware of the specifics and regulations of the EPF. With careful planning and timely investments, EPF can be a key element of a secure and comfortable retirement.