Details you must know about your Provident Fund Account

Employees Provident fund is a social security for all salaried employees who works in an organisation which falls within the ambit of Employees Provident Fund Organisation (EPFO). An equal contribution is given by the employer and the employee to this account. This blog speaks about the finer details about the contribution and the recent updates.

The statutory contribution by the employer to this account is 12% of basic salary and an equal deduction is done from the employee salary and contributed to the PF's account on a monthly basis. Whilst the employee's contribution goes in full, the employer contribution is split into PF fund and Employee Pension Fund. A sum equal to 8.33% of Basic salary up to Rs.15000 (Rs.1250) is contributed from the employer's contribution to Employee Pension fund.

Example : If the basic salary of the employee is Rs.24000, then a maximum of Rs.1250 will go to pension fund and the remaining Rs.1630 will go to PF fund. As explained above the entire employee contribution of 12% basic (Rs.2880) will go to Pension fund.

Basic Salary	Rs.24000
12% Basic	Rs.2880
	PF Fund	Pension Fund
Employer	1630	1250
Employee	2880
Monthly Contribution	4510	1250

Provident Fund gives the best returns amongst all the financial instruments. The current ROI for the  year 2016-17 is fixed at 8.75% and this is revised from the previous ROI of 8.8% . Our Honorable Union Labour Minister has hinted that this is only a interim change and employee's can expect a hike in the near future. 

Apart from the best returns PF also gives tax savings options. The annual contribution to PF by the employee is exempted from tax under Sec 80C. The amount accumulated will be paid to the employee either at the time of retirement or at the time of leaving the company. However recently a cap has been placed  for withdrawing PF amount only to the extent of employee contribution, if the employee leaves the company considering the employee social security at the time of retirement. Such withdrawal will attract taxes.

An employee is eligible to take loans against PF after a specified period. Based on the need, the tenure and percentage of amount which can be availed as loan from the accumulated contribution is decided. The employee may reach out to the PF office or the company HR contact to know more details about his/her loan eligibility.

The employee while shifting jobs should ensure that 2 forms (One for PF and other pension Fund) is filled in and submitted at PF office or to the HR contact of the relieving company to get the amount transfered to the new employer or to withdraw the amount. In most cases, the transfer to the new account doesn't happen properly and this leads to a lot of unclaimed PF amount. This was due to every company having a separate PF account created for its employee.

In order to avoid this confusion, the government has come up with an initiative of providing a single common PF account number to every salaried employee and this number doesn't change when an employee change his job. In this era of job hopping this comes as a boon to the GEN X & GEN Y employees. The single common PF account number is known as UAN (Universal Account Number). Slowly this UAN will replace the existing PF account number. 

The employee can get his/her UAN number known from his employer. Get this number activated in the UAN Portal Activation Link for UAN. One mobile number can be used for one registration only. This helps one to print their UAN card, view PF account balance, file and view transfer claims.

Thanks to the Digital India Initiative and now we can have online access to our own PF accounts. PF is no more an unknown area. So why to wait ? Get your UAN activated soon and have complete control of your PF account.