Provident FundCompensation Management

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Provident Fund

• The Employee Provident

Fund (EPF) or simply

Provident Fund (PF) is a

long-term savings and

pension instrument for all

salaried persons in India.

Provident Fund• For all employees in such

an organisation who draw a

basic monthly salary

of Rs 6,500 or less, the PF is

mandatory. For all others, the

PF is optional -- such

employees can opt out of the

PF at his discretion.

Provident Fund• The statutory requirement

– The EPF is maintained solely by

the Employees' Provident Fund

Organisation of India. As a

statutory rule, any company

having more than 20

employees, have to register

with the EPFO.

Provident Fund• Contribution to EPF

– Employees' contribution to the

EPF comprises of 12 per cent of

the Basic + DA + the cash value

of food allowances. An equal

amount of 12 per cent is

contributed by the employer

too, to the fund.

Why should you contribute to the EPF?

• Safety of returns– The EPF is the safest debt

instrument to invest in. Backed by the government, it guarantees safety of principal as well as the interest earned, making it suitable for long term financial goals. It also brings about an automatic discipline in investing.

Why should you contribute to the EPF?

• Loan options on EPF– Most companies offer you

a loan against EPF as a security at reasonable rates of interest. So the higher your PF balance, the more is your eligibility for such loans. In times of a crisis, if you so require some money, your EPF could come to your rescue.

Why should you contribute to the EPF?

• Tax treatment on EPF– The contributions you make

towards your provident fund gets you a tax benefit under section 80C, up to a maximum limit of Rs 1,00,000. Also, the maturity proceeds are tax free, if contributions to the fund have been for more than five years.

Why should you contribute to the EPF?

• Interest earned on EPF– The rate of interest earned

on a PF account is fixed every year during the months of March or April by the Government. The EPF currently for the financial year 2010-2011 carries an interest rate of 9.5 per cent. This interest rate is guaranteed and risk-free.

Why should you contribute to the EPF?

• Withdrawal facility in EPF– The complete amount from

your PF could be withdrawn on Retirement at the age of 55 years or due to early retirement on account of some disability etc. Partial withdrawal of money from the fund is permitted occasionally to meet expenses of marriage, medical costs or for building or purchase of a home.

Why should you contribute to the EPF?

• Shifting of jobs

– At such times, the PF balance

could be transferred from one

employer to another. The

existing balance would

continue to stay. With fresh

contributions made by the new

employer.

Why should you contribute to the EPF?

• Quitting of job

– PF could be withdrawn, if

you quit your job and

provide a declaration that

you do not intend to work

for the next six month.