Whenever the EPF scheme comes to our minds, we find it worth enrolling in. But there may be times where you might want to withdraw from it. This might be because you wanted more in-hand salary. The reason behind getting more in hand salary could be circumstantial. So in this article, we will have a discussion on Is it really compulsory for all the employees to contribute to the PF?
Eligibility Criteria For Contributing To Provident Fund
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The EPF guidelines are drafted by EPFO. It is a government organisation that looks at the functioning of EPF. According to the rules, the eligibility criteria for contributing to the PF account depends on different conditions:
i. A company having more than 20 employees is liable to register for EPF. Also, companies having less than 20 can also apply for it.
ii. Let us now look at the criteria according to the salary of the employees.
If the employee earns less than ₹15000 then it is necessary to open a PF account for him/her. This salary figure is the sum of basic pay and expense allowances. But if you earn, over ₹15000 then you are considered ineligible. Although you can register for the same with the consent of your employer. You also need to seek approval of PF assistant commissioner of the company. You must always seek the EPF scheme if possible as it is very fruitful.
iii. Another factor to consider is basic pay. If you earn less than ₹6500 as a basic, then enrolment becomes necessary. Moreover, if the basic pay lies above this mark then the participation in EPF is not compulsory.
To conclude, if you fail on any of these requirements, then EPF contribution becomes a necessity. Also, if you fail on both the points then also it remains compulsory. But if you cross that mark of the above-mentioned points then the contribution is voluntary.
Percentage Deduction On EPF Account By Employer And Employee
Both the employee and the employer pay for the EPF account of the employee. An employee is subjected to 12% of basic to pay as their contribution. An employer makes the same contribution to your account which would be 12%. But all the employer’s contribution doesn’t go into the EPF account. Of that 12%, you receive 3.67% in your EPF account. Also, 8.33% of that 12% goes to EPS. Although above a certain limit, extra money of the EPS is given into your EPF account directly.
Enrollment Norm Of EPF Account
By this, you should be cautioned that once you enroll, then there is no opting out or leaving it. This means if you enroll in the EPF scheme. Then, you can’t pull out from it. Once enrolled in a particular job with an EPF account contribution, then you can’t give it up in between.
In order to do this, you can fill out form 11. This can be provided to the EPF manager of the company. But, remember even if you had paid for EPF once. Then, you would not be able to opt-out from it.
This would answer, why you should opt for EPF? Whether it is compulsory or not. The PF cut might seem to be a good amount. But it has many advantages. Firstly, are the tax benefits. Under section -80C theEPF amount is tax-free. But only if you withdraw from it after 5 years of service. Secondly, are the retirement benefits. By the time you reach your retirement, you can have a huge amount that you couldn’t have imagined. Lastly, are the withdrawal benefits. You can avail some amount of money from the EPF only after 8 years of continuous contribution. But there should be a reason for availing this money. The reason could be a sister marriage, child education etc. Also, the investment benefits you earn makes it exceptional. You are awarded an interest rate of8.50% yearly on the total balance. That is considered good when compared to other investment schemes.
What is EPF?
EPF is Employees provident fund for the salaried employee. It is widely considered as a retirement benefits scheme. It is used by the employees to save a part of their salary. It comes handy when an employee is unable to work.
It might be compulsory for one and non-compulsory for the other employee. This depends on the details provided above. But remember the EPF scheme for a salaried employee is the best. It is money for your retirement life. Midterm withdrawal also provides help to fulfilmajor family responsibilities. So, a word of advice, do enroll for the EPF scheme.