In the realm of employment and remuneration, it is essential to understand the various components that make up an employee’s salary. One such component that often raises questions is PF (Full form of PF in salary is Provident Fund). This article aims to delve into the concept of PF in salary , explaining its types and PF eligibility . By gaining clarity on this topic, individuals can better comprehend their financial entitlements and plan for a secure future.
PF in salary refers to a mandatory contribution made by both employers and employees towards a retirement savings scheme governed by the government of India. It is a retirement scheme that is maintained throughout the working years to ensure that there are enough funds during retirement. Having PF in salary is helpful in the future as it creates a retirement corpus where making withdrawals for the entire amount is possible post-retirement. The amount in the provident fund typically includes the employer’s contributions and interest rate free from income tax.
Organisations with more than 20 employees have to open a PF where both the employer and the employees contribute to the fund. Generally, the contribution involves around 12% of the basic salary, keeping in mind the dearness allowance, if any. Here’s how PF in salary works:
While any type of provident fund is excellent for the security of a working professional post-retirement, there are certain criteria a company and employee should know about. Here are some PF eligibility criteria that you should be aware of:
Let’s understand the nuances of EPF and PPF side-by-side.
| Parameters | EPF | PPF |
| Type | Mandatory for employees in the organized sector. (Mandatory for an organization having at least 20 employees) | Voluntary scheme open to all Indian citizens |
| Purpose | Retirement savings | Long-term savings and tax benefits |
| Contributions by | Employee and employer | Individual |
| Eligibility | Employees earning a monthly wage | Any Indian citizen |
| Interest Rate | Set by government, typically higher than PPF |
PF in salary refers to the contribution made by an employee and employer towards their retirement fund. It is a mandatory deduction as per the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, in India.
Understanding PF is crucial for employees as it secures their future and provides tax benefits and financial stability during retirement. By actively participating in the PF scheme, individuals can ensure a comfortable post-retirement life. Therefore, both employees and employers need to be well-informed about PF in salary and its implications.
What is the interest rate on EPF for the financial year 2024-25?
The EPF interest rate for the year 2024 is 8.25% per annum. While it is calculated monthly, the interest rate is transferred to the provident fund account only at the end of the financial year, 31st March.
Can I withdraw the full PF amount?
Yes, you can withdraw the full PF amount post-retirement, the decided age is after 58 years. You can even withdraw the entire PF amount if you have been unemployed for over two months.
Is there any upper limit on contribution to EPF?
Employees and their employers must contribute 12% of the basic salary to the provident fund every month. This is the upper limit. If a company voluntarily contributes to a type of PF, it can contribute more than 12%.
Can an employee contribute more than 12% to EPF?
If an employee has chosen a Voluntary Provident Fund (VPF), they can contribute more than 12% to the fund.
Is PF taxable?
If you withdraw above ₹50,000 within five years of starting the PF account, then you are eligible to pay a tax of 10% with PAN TDS and 34.6% without PAN TDS. But, post the five-year mark, there are no tax implications for withdrawal of ₹50,000 or more.
Is PF mandatory?
Yes, every company with more than 20 employees has to register with the Employees’ Provident Fund Organisation of India mandatorily. A company with less than 20 employees may also voluntarily contribute to a provident fund.
Is PF part of 80c?
Yes. Section 80C of the Income Tax Act allows deductions of investments made for Employee Provident Fund, Public Provident Fund, and LIC Premium.
What is the basic salary for EPF?
The basic salary of an employee must be less than ₹15,000 a month to apply for an EPF.
