Each investment is aimed towards three financial goals: build wealth, have a regular income from a pension when we retire, and protect the future of our families. And, while we purchase separate financial items to attain each of these objectives, there is one product that aids in the achievement of all three objectives. Because it is a part of our pay, the majority of us are not only aware of it, but actually invest in it. Employee Provident Fund, or EPF, is the product.
What is Provident Fund (PF)?
A Provident Fund (PF) is a savings and retirement fund in India that is typically established and contributed to by salaried employees and their employers. It is a government-backed initiative aimed at providing financial security to employees during their retirement years. Both the employee and employer make regular contributions to the fund, with a portion of the employee's salary allocated towards the PF account. These contributions accumulate over the years, earning interest, and can be withdrawn upon retirement or for specific purposes like buying a house, education, or medical emergencies. The Employees' Provident Fund (EPF) and the Public Provident Fund (PPF) are two common types of PFs in India, with the EPF primarily applicable to organized sector employees and the PPF open to all Indian citizens. PF accounts help individuals build a financial cushion for their post-retirement life and achieve long-term financial goals. They also offer tax benefits and are an integral part of the country's social security system.
What are the provident fund benefits?
The following are some of the EPF's advantages:
- It aids in long-term financial planning.
- There is no need to invest in a single, lump-sum amount. Employees' salaries are deducted on a regular basis, which allows them to save a significant amount of money over time.
- It may be able to assist an employee financially in the event of an emergency.
- It aids in the saving of money for retirement and the maintenance of a healthy lifestyle.
Eligibility Criteria for Employee’s Provident Fund
The following are the eligibility requirements for enrolling in the EPF scheme:
- Registration for an EPF account is required for salaried employees earning Rs. 15,000 per month inclusive of the basic wages and dearness allowance.
- If a company employs more than 20 people, it is required by law to enroll in the EPF plan.
- A business with less than 20 employees may join the EPF plan on a voluntary basis.
- Employees earning more than Rs. 15,000 can open an EPF account, but they must first receive permission from their employer and the Assistant PF commissioner.
- The EPF scheme's requirements apply to the entire country of India (except for the states of Jammu and Kashmir).
Types of Provident Funds
There are mainly three different types of PFs, which are as follows:
- The general Provident Funds is a type of PF maintained by government bodies, including local authorities, the railways, and other such bodies.
- The recognised Provident Fund is the one that applies to all privately owned organisations that have more than 20 employees. Moreover, holding a rightful claim to the PF associated with your organisation, you will be given a UAN or Universal Account Number. This enables you to transfer your PF funds from one employer to another whenever you move from one occupation to another.
- The public provident fund is defined by the voluntary nature of investment on the part of the employee. The PPF is also associated with a minimum deposit of Rs. 500 and a maximum amount of Rs. 1.5 lakh. The PPF has a lock-in period of 15 years.
Besides the PF, another safe investment that enables wealth generation is the Bajaj Finance Fixed Deposit. With this provision, you enjoy the benefit of attractive FD interest rates at flexible investment tenure options. Another advantage is the Bajaj Finance FD, which allows you to invest conveniently through a 100% digital process.