Provident Fund is a retirement savings scheme which is compulsory in order to secure the financials of the person. It is a scheme arranged by government similar to a scheme of the social security program in the United States. It is composed of the saved contributions of the employees in a company throughout the working time with the same contribution made by the employers. UAN Provident Fund is calculated as the 12 % of the person’s salary and it is returned to the employee at the time of their retirement.
The significance of the Provident Funds:
The Purpose of the Provident Fund is to provide the financial security or monetary support to the employees at the time they got retired. What usually seems to happen is after living most of their life, dedicated to the company or family, the person has to depend to their family members or relatives with no returns whatever achieved throughout the person’s tenure. Social Security Programmes like this are earlier initiated in places like Mexico, Singapore, and India. Workers, as well as the Employers both, are supposed to contribute a certain amount collectively used after the worker get retired. This certain amount is the sum of the worker’s certain percentage of his salary and the same amount provided by the employer as well.
Different Types of Provident Fund:
- Statutory Provident Funds:
All establishments, companies, and industries which have employment number of 20 or more than 20 are supposed to contribute to the provident fund for employees. These kinds of provident funds are specifically dedicated to those employees in an organization whose income is lower than a particular prescribed limit by the government.
- Voluntary Provident Funds:
The contribution given in this kind of provident funds is voluntary. This kind of provident funds is applicable for employees whose salary is beyond the limitations decided by the government.
- Recognized Provident Funds:
In this kind of funds, the contributions made by the employees and employer are recognized for the calculation of income tax.
- Unrecognized Provident Funds:
Unlike the recognized provident funds, in unrecognized provident funds, the funds contributed from the employers and employees are unrecognized for the calculation of income tax.
- Public Provident Funds:
These particular kinds of provident funds are specifically designed for business-oriented or self-employed people with profiles like Engineers, Businessmen, Doctors, and lawyers.
How to Calculate Provident Fund?
Provident Fund can be calculated with the help of EPF (Employees’ Provident Fund) Calculator. It helps you to calculate the amount of money that you will be going to have on your retirement.
To use the EPF calculator, you need to have few details which are following:
- You will need the details like your present age and that age on which you want to retire.
- You also need the data about your basic monthly salary and average annual increase you get every year at your basic salary.
- The amount you have contributed to the provident fund and also the amount of the contribution from your employer’s side.
- The interest rate you earn on the EPF balances which are declared by the government each year.
When you have all these information, you just need to submit it and the calculator will show the amount you will get at the time of retirement. These EPF calculators you can get from online to perform this calculation with very few and easy steps.
These calculations are based upon these three methods:
Method 1: Employee Contribution will be 12% of Basic pay + DA and Employer Contribution will be 12% of Basic Pay – 8.33% of Rs 15,000
Method 2: Employee Contribution will be 12% of Basic Pay + DA and Employer Contribution will be 3.67% of Rs 15,000
Method 3: Employee Contribution will be 12% of Rs 15,000 and Employer Contribution will be 3.67% of Rs 15,000
Any member of Provident Fund is able to withdraw his/her provident fund at the maximum age limit which is set by the government of the country or also it could be at the age of retirement. However, there are other provisions where the person can withdraw the amount from the provident fund. In cases of property construction, loans repayment, treatment of illness, marriage expenses, acquisition, and others, a person is allowed to withdraw the provident funds.
Provident Fund is very crucial social and financial security government program offered to the people concerning their post-retirement life. The employees and employer equally contribute the same amount in form of a provident fund for employees to withdraw after a particular time. EPF (Employers’ Provident Fund) Calculator is a great online tool to find out how much you as an employee can withdraw from your provident fund at the time of retirement. For these calculations, you need present age, retiring age, basic monthly salary, average annual increase contributed an amount in PF by employee and employer along with interest rate on EPF balance.