Understanding provident fund (PF)
Let's talk about something that can be crucial to our long-term financial planning, yet overlooked or misunderstood - Provident Fund, or as it's commonly known, PF. It's a bit like the secret ingredient of a great recipe; not always front and centre, but vital for the end result. You see, a Provident Fund acts as a safety net that allows us to set aside a little bit of our income regularly and effortlessly.
Over time, this fund matures and accumulates into a substantial amount, ensuring we have a financial cushion to fall back on when we need it. Now, who wouldn't want that kind of financial security for their future? While organisations provide EPF for employees, it is essential to understand how PF contributes to retirement planning. But before we move on, let's understand what exactly is this Provident Fund we're talking about.
Imagine a piggy bank that not only stores your money but also helps it grow over time. Sounds amazing, right? That's essentially what a Provident Fund does. In essence, the Provident Fund (PF) is a government-backed, long-term investment scheme aimed at providing financial security to employees of the private and public sectors.
The workings of PF are quite straightforward. Every month, a certain percentage of your salary is deducted and directed towards your PF. This contribution is often matched by your employer, doubling the amount that goes into the fund. The beauty of it lies in the interest that is compounded annually, which can lead to a significant corpus over the years.
But it's not just about the money. The PF is so much more than just a retirement fund. It's a financial safety net that can be relied upon during emergencies or can be partially withdrawn for significant life events such as marriage, education, or buying a house. So, a PF not only ensures you have money for your sunset years but also supports you during significant milestones of your life. Now that we've scratched the surface of what PF is, let's delve into who can avail of this facility and how.
Eligibility criteria for provident fund
So, who is eligible for pf? Let's talk about the eligibility criteria for the Provident Fund. It's pretty straightforward, but still, it’s good to know the nitty-gritty.
1. Employee of a recognised organisation:
The first and foremost criterion for PF eligibility is being an employee of an organisation that is recognised by the Employees’ Provident Fund Organisation (EPFO). The employer contribution to pf includes most private and public sector entities.
2. Organisations with 20+ Employees:
Companies with more than 20 employees are mandated by law to provide PF benefits. So if you’re part of a small start-up or a family-owned business with less than 20 employees, you might not have a PF account by default.
3. Minimum salary of Rs 15,000:
If you're an employee earning less than Rs 15,000 per month, your employer is required to contribute towards your PF. However, if your monthly income exceeds this amount, you have the option to opt out of the PF scheme, provided you do this at the start of your employment.
4. International workers:
For those of us working abroad or in companies with international tie-ups, the rules are slightly different. International workers, as well as Indian workers who have worked or are working abroad, can also be part of the PF scheme, subject to certain conditions. If you fall into this category, I’d recommend checking the EPFO website or speaking with your HR for specific details.
5. Voluntary provident fund (VPF):
Even if your company doesn't fall under the obligatory criteria to contribute to the PF scheme, or you are self-employed, you can still be part of the PF world by contributing to the Voluntary Provident Fund (VPF). However, in this case, the contribution is entirely from your end, without any employer match.
So, that's the low down on EPF eligibility criteria for employees. Now that we've understood this, it's time for us to dive into the specifics of how one can actually start contributing towards their PF.
How to check your PF balance
Staying on top of your PF balance can feel like a bit of a maze, but trust me, it's not. The whole process is simple, and quick, and can be done right from the comfort of your couch. Let me guide you through this easy process:
1. Visit the EPFO portal:
First up, grab your device and head to the EPFO's official website. EPFO, in case you're wondering, stands for Employees' Provident Fund Organisation. Here’s the link: www.epfindia.gov.in.
2. Click on ‘e-Passbook’:
On the EPFO website, look for the 'Our Services' tab. It's usually located on the top menu bar. Once you’ve found it, select 'For Employees' from the drop-down menu. You'll be redirected to a new page. Look for the 'Services' tab and click on ‘Member Passbook’.
3. Log in to your account:
Now, this is where you'll need your Universal Account Number (UAN). It's a unique 12-digit number that’s assigned to every employee who contributes to the PF. If you don't know your UAN, don’t worry, just ask your employer. They’ll be able to give it to you. Enter your UAN and password to log in. If you’re logging in for the first time, you might need to activate your UAN. Again, it's a simple process and the website will guide you through it.
4. Access your passbook:
Once you're in, you'll find a list of Member IDs. These are all your PF accounts from previous and current employers. Click on the Member ID of the company for which you want to check the PF balance. And voila, your e-passbook will be displayed on the screen.
5. View your PF balance:
In your e-passbook, the last entry will show your PF balance till the last month. The balance is usually updated by the 2nd week of each month.
And there you go! You've successfully navigated the EPFO site and checked your PF balance. Not too tricky, right? But remember, if you ever have any issues, the EPFO helpdesk is always there to assist. Just remember to regularly keep an eye on your PF balance – it's a good habit and can help you plan for the future.
Importance of contributing to PF
There's a good reason why PF is considered one of the most popular savings tools in India. Let's explore why it's so crucial to make those regular contributions:
1. Saving for the golden years:
First things first, your PF is essentially a nest egg for your retirement. With regular contributions, you can build up a hefty sum over time that can help you enjoy a comfortable life when you hang up your boots.
2. Tax benefits:
Money saved is money earned, right? Contributing to PF not only helps you save for your future but it also brings tax benefits. The amount you put into your PF account is exempt from tax under Section 80C of the Income Tax Act.
3. Safety net:
Life can throw curveballs. You might face a financial emergency or require funds for something unexpected. Having a PF account provides you with a financial cushion to fall back on.
4. Interest earnings:
The government pays interest on your PF balance, so it's not just sitting there, it's growing! And the best part? The interest earned is tax-free!
We've walked through the concept of PF, checked out the eligibility criteria, and learned how to check the balance. Now, all that's left for you to do is take that first step. Yes, saving can feel like a big mountain to climb. But remember, it's about taking one step at a time. If you're eligible for PF, why not start your journey to financial security today? Every contribution matters and your future self will definitely thank you. This is why it would be wise to consider a zero balance account bank to save wisely. And earn great returns with features like kotak ActivMoney. So, get started today!
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.