General, Investment, Tax Savers

Provident Fund


Provident is a retirement saving scheme available to all salaried employees. There are broadly three types of provident funds: EMPLOYER PROVIDENT FUND (EPF /PF), EMPLOYEE PROVIDENT FUND (VPF), and PUBLIC PROVIDENT FUND (PPF). Basically workers contribute a part of their salary to the provident fund; employers must contribute on behalf of their employees. This money is paid back to the worker on retirement. Age limits are set .There is specific age limit within which penalty free withdrawals are allowed. Under special circumstances pre retirement withdrawal are allowed. Each National provident fund has set its own minimum and maximum level of contribution for both workers and employers.


In India, employer with an employee base of 20 or more are required to conform to employer provident fund run by the Government. Employer has to contribute to the employee‘s monthly income (generally 12 %). The aim is to contribute towards employee’s retirement benefits. As the amount is contributed by the employer from his pocket it is neither added to your income nor deducted, thus has no display in the salary slip. This amount is tax free.


  • Apart from the contributions made by the employer, employees also should contribute to their PF accounts. It is generally 12% or more as per the will of the employee. VPF is shown on the salary slip, as deduction from your monthly salary.
  • Employee provident fund organization (EPFO): – to assist the Central boards of trustees (formed under the Employee provident fund and Miscellaneous Provision Act 1952), under MINISTRY OF LABOUR AND EMPLOYMENT, GOVERNMENT OF INDIA.
  • As per the Directive Principles of the State policy – ‘ state shall within the limits of its economic capacity make effective provisions for securing the right to work, education and to public assistance in case of unemployment, old age sickness and disablement and undeserved want’. Following which the EPF&MP ACT 1952 came into effect. Three schemes are in operation under this act: Employee’s provident fund scheme, 1952; Employee’s deposit linked insurance scheme, 1976; Employee‘s pension scheme, 1995 (replacing the employer‘s family pension scheme, 1971).
  • Presently: EPFO on 21st February 2018 lowered the rate of interest on EPF from 8.65(2016-17) to 8.55% (2017-18).
  • The interest you earn on your EPF contributions is fixed annually by the Employees’ Provident Fund Organization (EPFO) in consultation with the government. Recently, EPFO announced an interest rate of 8.55 per cent for the financial year 2017-18.UNIVERSAL ACCOUNT NUMBER (UAN):-

    it is a 12 digit number allotted to employee contributing to EPF, will be generated for each provident fund members by EFPO. It is beneficial as :

  1. It acts as a cover up for multiple member IDs allotted to an individual by different establishments and also remains same through the lifetime of an employer.
  2. It reduces confusion i.e. easy tagging of multiple EPF members ID under a single number.
  3. Easy transfers and withdrawal of claims.
  4. Is a must for smooth transfer of PF

As per recent news update –“Government has reduced rate of interest on small saving schemes from April 1 2018 in line with the lower market rates, cutting returns on some of the schemes over 100 basis points. “


It is a personal provident fund account which can be opened with any designated bank like SBI etc. It is like a saving account which can be opened any time without any obligation. It is open for general public i.e. Businessman, self employed, non salaried, all are eligible for opening this particular provident fund account. It helps in long term investment. Moreover it helps you save income tax as the amount credited to this account is allowed to be included in your tax rebate investment.

Hence Provident funds are a very crucial tool for force – save for the future. It helps in inculcating the habit of saving with a very limited social security net. It stands out to be a very reliable source to meet the unforeseen life circumstances and expenditure such as medical emergency. It helps to meet the retirement goals such as family occasions, marriages, education. It is tool for good growth of money over years.


CA Rachit Jain

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