What is EPF and how does it work? You all have to know – CNBC TV18

What is EPF and how does it work? You all have to know – CNBC TV18



Employees Provident Fund (EPF) is a government -backed retirement savings scheme that aims to provide financial stability to employees after retirement. It is managed by the Provident Fund Organization (EPFO) of employees under the Ministry of Labor and Employment.

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The EPF allows both the company and the employee to contribute the same amount for savings. The accumulated amount in EPF increases over time until the retirement of the employee. Each salaried employee needs to contribute to EPF earning up to ₹ 15,000 per month, along with the employee who contributes equally to the company and the employee.

Each year, the government determines the interest rate on EPF, which is usually amended by the EPFO ​​Central Board of Trustees in consultation with the Ministry of Finance. For the financial year 2024-25, the interest rate is fixed at 8.33%.

Remaining in EPF account can only be withdrawn in retirement, job changes or some emergency situations.

However, if EPF

Before completing five years of continuous service, the remaining amount is withdrawn, returning to return. The contribution made to the EPF is eligible for tax deduction under Section 80C of the Income Tax Act, and EPF is the interest tax-free earned on contribution.

How does EPF work?

Employees and employers contribute to the EPF scheme to a similar part of the employee’s salary. The joint contribution is then deposited with the EPFO. The amount in the EPF account earns a certain rate of interest, which is credited every year by the EPFO.

For example, if you contribute to EPF as part of your salary of 7,000 per month, the employer will also match it with another ₹ 7,000. A joint amount of ₹ 14,000 is then deposited with the EPFO.

You will earn interest on this amount (currently 8.33% per year), annual credit will be given. This interest rate can turn as an EPFO ​​review and determine the rate at the beginning of each financial year.

The contribution to EPF is usually 12% of the basic salary and dearness allowance of the employee, according to the law.

When you can withdraw EPF (T) how EPF works (T) on all EPF