Employee Provident Fund Organization – Importance and Benefits –

 

About Employees Provident Fund Organization (EPFO) –

As per the directives of Constitution of India, the Employees Provident Fund act came into existence. This is one of the Social Security laws and is meant for enabling the savings from the salary or wages of employees for their future. (Provident Fund is known as “Bhavishya Nidhi” in Hindi language which means “Fund for Future”.

Employees Provident Fund Organization is one of the World’s largest Social Security Organisations. It has a very high number of members subscribing to it and also high volume of funds. At present Employees Provident Fund Organization maintains over 24 crores accounts as per the Annual Report 2019-20 relating to its members.

The Employees’ Provident Fund Organization came into existence with the promulgation of the Employees’ Provident Funds Ordinance on the 15th November, 1951. It was replaced by the Employees’ Provident Funds Act, 1952. The Employees’ Provident Funds Bill was introduced in the Parliament as Bill Number 15 of the year 1952 as a Bill to provide for the institution of provident funds for employees in factories and other establishments. The Employees Provident Fund Act is now referred as the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 which extends to the whole of India. The Act and Schemes framed there under are administered by a tri-partite Board known as the Central Board of Trustees, Employees’ Provident Fund, consisting of representatives of Government (Both Central and State), Employers, and Employees.

For Free Demo classes Call: 8087330391

Registration Link: Click Here!

 

Importance of the Provident Fund –

• Employees must understand this in the true sense.
• Employees must try to avoid withdrawing the funds as far as they can. The more funds in your Provident Fund account mean a secured future.
• Most people make that mistake of withdrawing the said fund even though it can be avoided. 
• Employee Provident Fund organization gives a very high rate of interest. The Employees Provident Fund Organization announces a new rate of interest every year. This year the rate of interest is cut down to 8.1% but it is far better than bank interest rates.

 

Benefits of being a member of Provident Employees Fund –

 

1.Retirement Fund Reserve:

Through the Employees Provident Fund, you are reserving significant fund for your retired life. This gives you a feeling of being self-sufficient and you can live a respectable life.

 

2.Employees’ Pension Fund:

Along with the Provident Fund, your employer is also contributing to your pension fund every month by default.

As of now, your monthly pension, when you retire, is calculated as per the following formula:

Monthly pension = (Pensionable Salary * Pensionable service) / 70

Pensionable salary : is the average monthly salary (PF wages) in the last 12 months before retiring.

Pensionable Service : is the total / cumulative service (i.e. contribution to employees’ pension fund). This means you should add up the total period while you contributed to the employees’ pension fund for the durations you worked in various employments. It is the total duration put together.

Example:

Since you are currently contributing on maximum or Rs. 15000/- per month, the pensionable salary will be Rs. 15,000/-.

Assume that the pensionable service (total duration with all the employers of an employee is 35 years.

Monthly pension will be calculated as:

Monthly pension = (Pensionable Salary * Pensionable service) / 70

= (15000 * 35) / 70

= 7,500/-

Therefore, in this example, the retired employee gets Rs. 7,500/- as the monthly pension.

Currently, the minimum pension that a person gets every month under EPS scheme is Rs. 1,000 per month.

 

Reduced pension – An employee who has contributed in Employees’ Pension Scheme for 10 years or more can withdraw an early pension, if he or she has attained the age of 50 but is less than 58 years old. In such cases, the employee can get reduced pension.

In case the employee dies while he or she was an active member of Employees Pension Scheme, his family becomes eligible for pension.

1. Widow Pension – widow of the member who was contributing to Employees Pension Scheme will get Widow pension.

 

2. Child Pension – If the member who was contributing to Employees Pension Scheme dies, his or her surviving children become eligible to receive a monthly pension under the Employees’ Pension Scheme. This benefit is in addition to the widow pension that the deceased’s wife becomes eligible to. Maximum upto two children can become eligible for monthly pension until they become 25 years old.

 

3. Orphan pension – If the member who was contributing to Employees Pension Scheme dies, whose wife also died, then his children are eligible for receiving a pension under the orphan EPF pension scheme. 

 

For Free Demo classes Call: 8087330391

Registration Link: Click Here!

 

3.Employees’ Deposit-Linked Insurance (EDLI) Scheme:

• If an employee contributing to the Employees Provident Fund dies, his nominee (family member) becomes eligible to get this insurance amount called employees deposit linked insurance.
• Every employer (registered under EPFO) contributes to the EDLI (Employees’ Deposit Linked Insurance) every month, an amount equivalent to employees 0.5% of PF wages which makes them eligible for the Employees Deposit Linked Insurance (payable to the family member).
• The Employees Deposit Linked Insurance scheme was introduced as part of the Employees’ Provident Fund and Miscellaneous Provisions Act (EPF and MP Act), 1952. Through this scheme an insurance cover is provided by the Employees Provident Fund Organization to the private sector wages earners or salaried employees.
• In case of the death of an employee who was contributing to Employees Provident Fund (employer also by default contributes to the Employees Deposit Linked Insurance every month), the family gets insurance of up to ₹ 7 lakhs under the EDLI scheme.
• This is in addition to the Widow Pension, Child Pension or the Orphan pension that the family member/s may be eligible for due to the death of the contributing member.

 

4.Advance from the fund:

Employees who are contributing to the provident fund, are also eligible to get advance from the fund for various reasons like:

 

1. EPF Advance / Withdrawal for Purchase of House / Flat, Construction of House and acquisition of Site
2. Withdrawals from EPF A/c for Repayment of Home Loan
3. EPF partial withdrawals for Medical Treatments
4. EPF Partial Withdrawals for Education or Marriage Expenses
5. EPF advance to an Employee who is physically handicapped

For Free Demo classes Call: 8087330391

Registration Link: Click Here!

 

Author:-

Shashikant Phadtare

Call the Trainer and Book your free demo Class for JAVA now!!!

© Copyright 2021 | Sevenmentor Pvt Ltd.