EPFO: Every salaried person in India has an Employees Provident Fund (PF) account, and it is more than just a savings account. The Employees Provident Fund Organization (EPFO) is a premier social security agency under the Government of India, which regulates and manages the Provident Fund of employees working in the organized sector.
If you are a member of EPFO, you get the benefit of 3 excellent schemes, through which you will not have to worry about money from your job till retirement. Let us understand these three schemes in detail and know how they make your financial future secure.
Employees Provident Fund
EPF (Employee Provident Fund) is a retirement saving scheme. In this, a part of your salary is deposited every month, and your company (employer) also contributes the same amount. This is a fund that plays an important role in creating a large corpus for you in the long term. Currently, an annual interest rate of 8.25% is being given on this account, which is much better than many other savings options.
Rules for depositing in EPF account
Every month 12 percent of the basic salary and dearness allowance (DA) is deposited in the EPF account by EPFO members. The employer i.e. the company also contributes the same amount. However, the company’s contribution is divided into two parts:
Out of its 12%, 8.33% is deposited in the Employee Pension Scheme (EPS).
And the remaining 3.67% is deposited in the EPF account.
This division ensures that the employee has a large fund for retirement and also gets a regular pension.
Employee Pension Scheme
If you are an EPF (Employee Provident Fund) member, that is, money is deducted from the salary for the provident fund, then you should know that your contribution is also made to the Employee Pension Scheme (EPS). EPFO manages the Employee Pension Scheme (EPS). It is a pension scheme for employees working in the organized sector, which provides regular monthly income after retirement.
You will get the benefit of this scheme only if your job tenure is at least 10 years. However, you will start getting a regular pension after completing the age of 58 years. In some special conditions, 10 years of service is not mandatory, such as in case of permanent disability.
How much amount will be deposited in the account every month
Out of the contribution made by the company, 8.33 percent of the amount goes to the Employee Pension Fund (EPS). As per the current rules, the maximum limit of pensionable salary is ₹15,000. In such a case, ₹15,000 x 8.33% = ₹1250 will go into their pension account every month. This amount is fixed by the government and ensures that all eligible members get a fixed minimum pension.
EPS Calculator for Pension
Suppose you started working at the age of 25 and are retiring at the age of 58. That is, the duration of the job was 33 years. The maximum pensionable salary under the old pension scheme is ₹15,000.
The monthly pension will be calculated as follows:
₹15,000 x 33 (service years) / 70 = ₹7072
This is an estimated calculation and the actual pension depends on your service period, salary, and EPS rules.
Employee Deposit Linked Insurance Scheme
EDLI (Employee Deposit Linked Insurance Scheme) is a life insurance scheme offered by EPFO, which provides life insurance coverage to employees working in the organized sector. You do not have to make any contribution in this scheme, rather the employer contributes 0.5 percent of your EPF salary every month.
Under this scheme, the family of the employee gets a lump sum insurance amount in case of his death during the service period. This can be up to a maximum of ₹ 7 lakh, which is determined by the average balance of the last 12 months in the account. This is an important safety net to provide financial assistance to the family in an unexpected situation.