Employee Provident Fund - EPF / PF / EPS


Employee Provident Fund (EPF or PF) is the main pension scheme for large number of people working in private organized sector in India. It is managed by a government agency called 'Employees Provident Fund Organisation (EPFO)'. EPFO comes under the administrative control of the Ministry of Labour and Employment, Government of India.

A small portion of your monthly salary (typically 12% of basic) and same amount from your employer is deposited monthly in your EPF account.

Why Invest in EPF

There are two aspects to 'Why invest in Employee Provident Fund' aka EPF aka PF -

  • Is it mandatory? Do I need to invest in EPF?
  • Is it a good scheme to grow my money?

Is it Mandatory?

Yes, if you work in a private company having more than 20 employees. However, if your monthly salary (Basic + DA) is more than Rs 15000/-, it is not mandatory but it is a standard and best practice to invest in EPF.

In most cases, the employer is required to match your contribution See - Employer Contribution Not Same As Yours?. So if they deduct Rs 100 from your salary for EPF, the employer also puts in Rs 100 and total deposit is Rs 200. This makes it a very good scheme from employee perspective.

Is it a good scheme?

Without doubt, EPF is one of the best fixed return schemes available in India due to three reasons:

  1. Very good interest rates
  2. Interest is tax free
  3. Principal amount is exempted from income tax upto 1.5Lakh (section 80C)

Sounds too good to be true? The catch is that you can't withdraw your money at any time. This scheme is designed to act as a pension scheme. Hence the rules are designed in a manner to make it difficult to withdraw before 57 years of age.

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