What Is EPF?
Employee Provident Fund, known as EPF, is the retirement benefits scheme in the private sector for salaried employees. Here it collects the part of a basic salary contributed by the employer and the employee monthly. EPF scheme gives financial support to every salaried employee after retirement.
The EPF scheme lies under the EPF Miscellaneous Provisions Act, 1952. EPFO, which stands for Employees Provident Fund Organisation, has raised this Scheme where an organization must have a minimum of 20 employees to get itself registered under the EPF Act.
In this Scheme, employees have to pay a specific amount from their salary, and the employer pays an equal amount from their end every month. The amount contributed by an employee helps them in providing financial benefits post-retirement.
Schemes generated by EPFO
The EPF Scheme 1952
The Pension Scheme 1995
The Insurance Scheme 1976
Employees make a fixed contribution of 12% of their basic salary. Similarly, employers also make equal contributions to the EPF Scheme.
The interest rates get finalized by trustees of the Employee Provident Fund Board after the reference of the Ministry of Finance, and they have fixed an interest rate of 8.5% for FY2021.
After retirement, the employee will receive a lump-sum amount that includes the contribution of both employees and employer with interest. One of the critical notes is that out of 12%, only 3.67% goes towards the EPF account, and the rest, 8.33% goes in the EPS (Employee Pension Scheme) account.
Some Features of EPF:
Under EPF Scheme, it offers tax-free returns, which means that the interest earned by the employee gets fully exempted. In addition, the employee can withdraw their amount after completing their five years of employment tax-free with no TDS deduction.
The contribution made by an employee in the EPF Fund is tax-deductible that falls under sec 80 C in Income Tax Act.
The fund can be withdrawn from the EPF account by an employee before its maturity period for any medical or financial emergency.
For nomination, the employee can nominate any family members as a nominee. In case of their demise, the nominee can easily claim the corpus built until then. It would help the family to bear the financial crises.
Employees can withdraw the amount gathered till two months after their resignation.
If an employee resigns from the job for any reason, they can withdraw their leftover EPF balance and clear the account.
The employer also contributes to the EPS Scheme and EPF that can also get used after retirement.
EPF Scheme also provides life insurance cover. In uncertainty with an employee, the nominee can claim the insurance cover.
It's up to an employee what percentage of salary they want to contribute to a voluntary provident fund account. They can raise the contribution to more than 12% of their salary.
How Can An EPF Calculator Help You?
Using the EPF calculator, you can easily track where your money is stored, and the total amount of interest gathered to date.
Advantages of using EPF calculator online:
The manual effort of calculating total money every time is reduced.
Online EPF calculator works correctly on every turn.
If the interest rates and the contribution ratio vary over time, don't panic. The EPF calculator will automatically carry you towards modifying your account.
Lastly, the moment you use an EPF calculator, it will redirect you towards any recent transactions or contributions in your account.
The basic salary of an employee = Rs 15000
Contribution of employee towards EPF= 12% * 15000= Rs 1800
Contribution of employer towards EPF= 3.67% * 15000= Rs 550
Contribution of employer towards EPS= 8.33% * 15000= Rs 1250
Total contribution made by both(employer & employee) towards EPF account of employee = 1800+550= Rs 2350
Interest rate is 8.5%
So the interest rate for each month is: 8.5%/12 = 0.70833%
Assuming that employee joined an organization XYZ in April 2019.
The total contribution in EPF for April will be Rs 2350.
EPF Scheme will not pay interest for April.
Then the total contribution of EPF for May = Rs 4700 (2350 + 2350)
Interest received of Rs 4700 * 0.70833% = Rs 33.29
Similarly, calculation is done for the following months.
How To Check EPF Balance Online?
To check the EPF account balance online is the best and easy way. You don't have to wait for the employer to display it at the end of the year to check your EPF balance when your employer shares it with you. You must have online access to the EPF calculator as an employee.
Four methods to check EPF balance online:
Using Umang App
Mobiles has become the best source as they quickly access them. So, you can go through your EPF balance on your mobile phone with the help of the Umang App. Follow these basic steps and get your access:
Firstly, download the Umang App on your mobile phone.
Then, complete the one-time registration procedure by verifying your contact number to get started with this app.
After the registration process gets complete, you can now access the app to view your passbook, raise a claim or even track the claim with this particular application only.
EPFO Member E-Sewa Portal
EPFO runs various websites that provide access to the users to check their EPF passbooks.
To view your PF passbook on the website, you should first tag your account with your UAN (Universal Account Number).
An employee needs to have their UAN activated before using online services. As Universal Account Number gets issued by EPFO itself, it gets verified and started by the employer.
You can download or print the EPF passbook from a website and view it online by following these steps:
Firstly, log in to www.epfindia.gov.in. to view the member passbook.
Next, click on the "For Employees" tab under the "Our Services" tab.
Then click on the "Member Passbook" under the "Services" button.
It will take you to the sign-in page, and you need to fill up your details here to sign in with your online id and password. After completing the login, you can see your passbook. It entirely depends on whether you download it or get a printout.
Note: The passbook facility is unavailable for the members who get exempted under the EPF scheme Act 1952. Therefore, to view your EPF balance, contact your employer.
Another most straightforward method to check your EPF balance is by SMS service, which is available for the employees who have registered their UAN with EPFO.
To get the details of the latest contribution and your EPF account balance, send an SMS "EPFOHO" followed by registered UAN and the language preferred such as "ENG" or English to 7738299899 from the registered mobile number of an employee.
You can avail of this service in ten different languages.
Other than SMS service, you can also use a missed call method by giving a missed call from your RMN (Registered Mobile Number) to 011-22901406.
Ensure yourself that the employee's UAN gets linked with your bank account number, Aadhar card, and PAN. Ask your employer to get it done for you if it's not.
Benefits of EPF Calculator
For salaried persons, EPF provides the bulk of benefits to them such as:
Safe returns: EPF is guaranteed and backed up by the government regarding the safety of the principal amount and the interest earned. EPF account will help you gather the total amount at retirement as the contribution gets collected monthly for your entire work journey.
Friendly Tax management: it's an EEE instrument that means your contributions get already deductible under sec 80C, and the interest contributed on it is entirely tax-free.
Interest earned on EPF equals the high pre-tax rate: We consider EPF will pay 8.75% this year; it gets equal to 12.50% of interest. The interest rate is entirely risk-free and guaranteed.
Various EPF calculators are available there to calculate your EPF balance. Here we will talk about one EPF calculator, say ClearTax EPF Calculator.
Benefits of Using ClearTax EPF Calculator
The EPF calculator represents the total amount gathered in your EPF fund account at your retirement. As a result, you will get an idea of your retirement amount that will help you manage your other investments in a much better way.
EPF Calculator is also used to increase the contribution towards your retirement. For example, suppose you think that the amount contributed at retirement is insufficient to meet your future requirements.
In that case, you can increase the contribution percentage to receive a more extensive corpus at the time of retirement.
EPF Calculator is easy to use and displays EPF total contribution at retirement in seconds.
The EPF calculator helps to plan your retirement with security. You can increase the contribution percentage by yourself if you wish to retire earlier than your retirement date.
You can also get an idea for the EPF total amount gathered at the retirement periods, which helps you get the finances for the early retirement period.
How To Use EPF Calculator
Using the EPF Calculator is very easy. The moment you enter the values in the system, the result will get generated within a few seconds and will get displayed on your screen.
- Step 1: Firstly, enter your salary and age into the EPF Calculator.
- Step 2: Secondly, the moment you enter the values, the employer's total contribution, i.e., EPS + EPF, genuine interest earned, and the entire maturity amount, will get reflected in the results.
EPF Calculators are handy for the employees to get easy access to their EPF account and be aware of the modifications and the transactions made in the account. As mentioned above, they can provide you with the results within seconds with complete accuracy every time you visit.
It reduces your manual efforts to calculate the accumulated contribution by the employer and employee.
Now getting access to your EPF account has become that easy and at your fingertips. By following specific steps, you can easily calculate your accumulated EPF till the date of retirement.
You can also go through your EPF account balance online using various methods whenever you want to rather than waiting for your employer to display it at the end of a year.
Frequently Asked Question
Q1. How does an EPF calculator work?
Basic Salary= 14000
Employee contribution= 12% * 14000= 1680
Employers contribution in EPF= 3.67% * 14000= 514
Employers contribution in EPS= 8.33% * 14000= 1166
Total contribution by employer and employee in EPF= 1680 +514= 2194
Interest rate= 8.5%
Interest per month= 8.5%/12= 0.70833%
Assuming that employee joined an organisation XYZ in April 2020.
total contribution for April = Rs 2194.
total contribution of May = Rs 4388 (2194 + 2194)
Interest received in may Rs 4388 * 0.70833% = Rs 31.08
Q2. When can I withdraw my contributed money from the EPF account?
You may withdraw the money from your EPF account for the following reasons:
- After completing seven years of your job.
- Three times during the EPF account's duration.
- For construction or the purchase of a house, including acquiring a plot.
- Repayment of your loans.
- Marriage or education purpose
- Repair or the renovation of the existing house.
- Any medical treatment in case of some severe illness.
- Withdrawing EPF total amount gathered within one year before the retirement.
Q3. Does EPFO invest in ETFs?
Yes, they invest in Exchange Traded Funds. EPFO also invests in Sensex and the Nifty50 and the Central Public Sector Enterprises or CPSE and Bharat 22 indices. EPFO also invests in the equity markets via ETFs with only a small portion of a minimum of 5 to 15 %of EPF Funds.
Q4. Does EPF offer a high rate of interest?
Yes, currently, EPF offers 8.5% for 2021. EPF serves the employees with one of the highest interest rates among the fixed-income instruments.
Investment in EPF Scheme gets tax deduction of up to a maximum of Rs 1.5 LPA under the opt-out sec 80C of Income Tax Act, 1961 that falls under the category of EEE where total interest and the total contribution on withdrawal gets tax free. It has made EPF the most tax-free investment.
Q5. Where does EPFO invest my money?
EPF invests 45 to 50 percent of its funds in Government Securities and related instruments. Another 35 to 45 % of funds get invested in the debt and other instruments. And at last, the remaining 5 to 15 % gets invested in equities and other related instruments.