EPFO Update: There is big news for EPF account holders. Actually, the central government is going to implement the new law from April 1.
After which tax will be applied under the undisclosed limit on tax free contributions to PF accounts. According to which tax-free contribution for non-government employees exceeds Rs 2.5 lakh, this amount will come under the tax net. Whereas for government employees, the figure sets a limit of Rs 5 lakh.
This means that if a non-government employee deposits more than Rs 2.5 lakh in his PF account, then that amount will come under the tax net. Similarly, for government employees, the interest on the excess amount deposited in excess of the limit of Rs 5 lakh will be taxable.
Apart from this, according to the order of the Supreme Court, now the employer will be liable to pay compensation for the delay in payment of contribution to the Employees’ Provident Fund.
In the case, the Supreme Court said that mandatory deduction will be made on the employer for provident fund and the employer will be entrusted with the responsibility of depositing the amount in the account of the workers in the EPF office.
A provident fund account is a great way to save for retirement employees. Basic income and dearness allowance of both the employee and the employer are kept in the EPFO accounts in the ratio of 24% (12+12). The government fixes interest every year on the money deposited in this EPF account.
The current interest rate is 8.5%. This results in a higher retirement fund. Also, compound interest works so well that with 25 years of investment, you can become a millionaire.
Account holders assume that interest is paid on the total amount put into the provident fund. However this does not happen. Interest is not available on the amount going to the pension fund in the PF account. You can check your basic salary and DA on your monthly salary slip.
Every employee receives 12% of his basic salary + DA in his EPF account. In addition the employer contributes 12% of Basic Pay + DA. Interest is earned on the money collected by combining both the amounts. Interest is checked once a year, but the advantage of compound interest is that the interest has a double benefit.
How is interest calculated on EPF?
The money deposited every month in the PF account i.e. Monthly Running Balance is used to calculate the interest (EPF crore husband calculator).
However, it is deposited at the end of the year. As per the EPFO guidelines, if any cash is withdrawn in a year from the balance on the last day of the current financial year, then 12 months interest is deducted thereon.
EPFO always calculates on the opening and closing balance of the account. The monthly running balance is added and multiplied by the interest rate / 1200 to arrive at this figure.
Retirement amount on Rs 10,000 basic Rs 1.48 crore
- EPF member age 25 years
- retirement age 58 years
- Basic Pay Rs.10,000
- Interest Rate 8.65%
- Salary increases by 10% (annually)
- Total Fund Rs 1.48 cr
Retirement fund on basic salary of Rs 15,000
- EPF member age 25 years
- retirement age 58 years
- Basic Pay Rs 15,000
- Interest Rate 8.65%
- Salary increases by 10% (annually)
- Total fund Rs 2.32 crore
