Employees' Provident Fund (EPF)
The Employees' Provident Fund (EPF) Act, 1952 is the earliest legislation related to old age income security in India. It is a contributory provident fund. The main objective of the fund is to provide benefits upon retirement, resignation or death. Under the EPF scheme, regular contributions from the employee and the employer are credited to the personal account of each member to offer old age benefits along with the accrued interest thereon. Today, an employee must contribute a minimum of 12 percent of his basic pay (plus dearness allowance, if any) to his EPF. Therefore, if your basic pay is Rs.6,000, your employer will deduct Rs.720 every month and pay it into your EPF account with the Office of the Regional Provident Fund Commissioner, for which you are assigned a unique account number. Your employer too contributes an equal measure (12 percent of your basic salary) towards your retirement savings, but only a part of that goes into your EPF account. That is because a portion of it is diverted towards the Employees Pension Scheme, 1995. Under this, 8.33 percent of your basic salary (up to a maximum basic pay of Rs.6,500) goes to service the EPS (we'll explore the Effectiveness of this Pension Scheme later). In effect, therefore, if your basic salary is Rs.6,000, from out of your employer's matching contribution of Rs.720 (12 percent of basic), Rs.550 goes to service the EPS. The remaining (Rs.170) goes into your EPF account. Subscribers to the EPF have the option to make partial withdrawals for specified purposes such as house construction, higher education for children, marriage, and medical expenses associated with illness. Establishments covered by the EPF can either have the Employees' Provident Fund Organization (EPFO) manage the provident fund, or can undertake processes to qualify as an exempt establishment, whereby they manage the provident fund themselves. In general, exempted establishments are large companies. (Private Provident Funds). It is applicable to 180 industries/classes of establishments, which employ at least