Earlier, ‘provident fund’ i.e. PF is the only option for the salaried class to save their hard-earned money and build their retirement corpus. When both employees and employers contributed together in this scheme, the contribution increases and a considerable corpus forms at the time of retirement.
It is perhaps the simplest way to save some amount for the life after retirement without much hassle and hence, the majority of people believe that PF is the safest retirement planning scheme.
The Employee Provident Fund Organization (EPFO) is then allotted a Universal Account Number i.e. UAN to the employee. The PF account and UAN is connected and valid till the employee’s life. In fact, employees can easily switch their PF accounts when they change their job.
Let’s know everything about provident fund step by step; take a look-
- PF Full Form
The full form of PF is Provident fund.
- What is Provident Fund (PF)?
The Employee Provident Fund is a scheme with retirement benefits in which an employee of a company contributes a small part of his basic monthly payment. An organization also contributes a similar amount of money on behalf of employees in this scheme.
The scheme of Provident Fund was launched in 1952 under the Employee’s Provident Fund and Miscellaneous Act. All the regulations are set by the Employee Provident Fund Organization (EPFO) and all activities are governed by the Ministry of Labor and Employment.
- How does provident fund work and it is applicable to whom?
According to the PF Act, all companies with an employee base of more than 20 are needed to register with the EPFO. The employer and the employee both have to contribute 12% of the basic salary to the PF account.
Then, the government invests all this fun in securities to generate an interest rate in the range of 8% to 13% per annum. In case of job change, an employee can update the new organization with details of PF account.
- How to calculate interest on provident fund (PF)?
Currently (2019-20), the employee provident fund interest rate for 2019-2020 is 8.65%. The interest rate is calculated every month, but it is deposited in the PF account at the end of the financial year.
PF is a saving platform which help workforce of organizations to save a fraction of their monthly salaries that can be utilized upon retirement. Nowadays, many companies use online payroll software to perform accurate salary calculations, including the PF amount to avoid human errors and/or delays. Even if you don’t opt for PF, then your in-hand salary increases. But, spending less now could bring financial stability later.
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