PROVIDEND FUND

What is PF (Provident Fund)?

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PF, or Provident Fund, typically refers to the Employees’ Provident Fund (EPF) in India—a government-backed retirement savings scheme regulated by the Employees' Provident Fund Organisation (EPFO) under the Ministry of Labour and Employment.

It is designed to help employees build a retirement corpus through regular contributions made by both the employee and employer during the course of employment.

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Key Features of PF/EPF:

• Applicability:
  Mandatory for establishments with 20 or more employees, but can be voluntarily adopted by smaller firms.

• Contribution Structure:

  • Employee contributes 12% of basic salary + dearness allowance

  • Employer also contributes 12%, but only 3.67% goes to EPF; the remaining 8.33% is allocated to the Employees’ Pension Scheme (EPS)

• Interest Rate:
  EPF contributions earn annual interest, declared by the EPFO (e.g., 8.15% for FY 2022–23).

• Withdrawal:

  • Can be withdrawn partially for specific purposes (e.g., home purchase, education, marriage)

  • Full withdrawal is allowed at retirement or after 2 months of unemployment

• Tax Benefits:

  • Contributions qualify for deduction under Section 80C of the Income Tax Act

  • Interest and maturity amounts are tax-free, subject to certain conditions

In short, PF is a compulsory, long-term savings tool for employees, providing financial security after retirement and support during emergencies.