Provident fund is defined as a contribution fund available to all salaried employess while working with an organisation and It provides employees with lumpsum payments at the time of exit from the organisation.
On 4th march 1952 headquatered at New delhi Employees Provident Fund organisation was formed under Ministry Of Government Of India .and any organisation with employee base more than 20 is required by Law to register with the EPFO.
When an individual starts working, with an organisation he and his employer both contribute 12% of basic salary (plus dearness allowances, if any) into your EPF account . The entire 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer, while the balance 8.33% from your employer’s side is diverted to your EPS (Employee’s Pension Scheme) . It’s important to note that if your basic pay is above ₹ 6,500 per month, your employer can only contribute 8.33% of 6,500 (i.e. ₹ 541) to your EPS and the balance goes into your EPF account
These funds are pooled together from many employees and invested by a trust. This generates an interest of 8% – 12%, which is decided by the government and the central board of trustees. The annual interest rate is available on the official EPF India website, and is currently at 8.75%. While contributions are made monthly, the interest is calculated yearly.
EPF is active every time employee receive pay. If he change jobs, it’s important to also update EPF information with new company, giving them his EPF number so that they can continue the contribution.
The employer contribution to employee EPF is tax-free, and individual contribution is tax-deductible under Section 80C of the Income Tax Act. The money invested in EPF, the interest earned and the money eventually withdrawn after the mandatory specified period (5 years) are exempt from Income Tax.
The UAN is a 12-digit unique number that has been given to every PF member. Before the introduction of the UAN, employees were inconvenienced by the fact that they had to keep shifting their accounts when they shift organisations, but now, the UAN controls all PF accounts of an employee and it can be functioned as one account. The UAN has made almost all processes of the EPF easier and convenient. Some of the benefits are:
All PF accounts of an employee are unified and can be treated as one account under the UAN.
Transfer from one PF account to another PF account can be done using the UAN.
Using the UAN, employees can now make withdrawals from their PF accounts. For those employees who have linked their Aadhaar card to their UAN, they do not need the attestation of their employers to make a withdrawal.
Using the UAN, employees can track their accounts, check the contributions, balance of their account and can manage their PF accounts all by themselves, without the hassle of their employer.