IS PROVIDENT FUND
A TOOL FOR SAVINGS ?
Employee Provident fund or EPF is a
fund made up of contributions by
the employee during the time he has
worked, along with an equal
contribution from the employer. It is
calculated as a percentage of
employee’s salary (Basic Salary +DA
+ Retaining allowance), normally
12%, and returned upon retirement.
All the employees (including casual,
part time, Daily wage contract etc.)
other then an excluded employee are
required to be enrolled as members of
the fund and the day they are enrolled
the EPF Act,1952 comes into force in
Every industry employing 10 or more
THE EPF ACT
• The Employees Provident Funds Act 1952
is compulsory contributory fund for the
future of an employee after retirement or
for his dependents in case of his early
• Act is applicable to all states of India
except Jammu and Kashmir
OBJECTIVES OF EPF
Providing old age / post service financial support /
income security to the member / dependent
Assigning employers liability to make contribution
in raising the fund for the benefit of employees and
their dependent survivors on compulsory basis.
Promoting thrift habit amongst employees and
enlarging domestic savings base.
Providing risk free and immunized deposit
accretion to the member free from attachment etc.
Augmenting resource availability position for
national economic development.
The Government wants to tell us the
importance of routine saving over a
long time. This lump sum given during
retirement can be used by the
employee to continue his life without
being financially dependent on anyone
and stand on his own
Apart from being a tool for our retirement savings,
Provident Fund offers numerous more benefits:
PF entitles you to get Pensions
8.33% of employer contribution goes towards
Employee Provident Fund in India provides insurance
too – 0.5% of your monthly basic pay goes towards
providing you insurance. The insurance cover is
maximum of –
1) 20 times the average monthly wage (maximum of
Rs 6500) – which comes to Rs 1,30,000
2) Full amount in your PF account up to Rs 50,000
and 40% of balance amount
1. Employer also contributes to Members PF @ 12% (
10% in case of sick industrial co., any establishment
having accumulated loss equal to its entire paid up
capital and any establishment in Jute Industry, Beedi
Industry, Brick Industry, Coir Industry and Gaur Gum
2. EPFO guarantees the Employer contribution and
credits interest at such rates as determined by the
3. Member can withdraw from this accumulations to
cater to financial exigencies in life - No need to refund
4. On resignation, the member can settle the account.
i.e., the member gets his PF contribution, Employer
Contribution and Interest.
Additionally provident fund may be
withdrawn partially to meet
expenses such as –
Marriage of self, siblings or children
Construction or Purchase of house or
flat/site or plot
Repaying of housing loan
Repairs to an existing home
• Upon closure of establishment and non-payment
• For meeting medical expenditure involving
• Upon damage of property as a result of natural
• For the purpose of education of son or daughter.
• For purchasing support equipment for physically
• Before one year of retirement after attaining 54
years of age.
Securing employees’ future through collective
contribution and compounded interest is the
essence behind the Provident Fund Act.
Employees with salaries up to a specified salary
ceiling are obliged to contribute to the fund while
those with above the ceiling salary can opt to
become a member.
While the Provident Fund Act stipulates twelve
percent is deposited totally, 8.33% of it is
secured as Pension scheme.
A company with twenty or more employees
excluding casual employment and apprenticeships is
covered by the Act.
It is regulated by a national office that usually sends
employers the details of the funds’ accumulations
including its opening balance, contributions and
withdrawals during the year, earned interest and
As the financial year is completed, this statement is
sent out to the employees usually by the company’s
Provident Fund Amount to Family (or to Nominee)
Pension to Family (or to Parent / Nominee)
Capital Return of Pension
Insurance (EDLI) amount to Family (or to Nominee)
No amount is taken from Member for this facility.
Employer contributes for this.
Nominee is basically determined as per the information
submitted by the member at this office through FORM-2