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Introduction

The Employees’ Provident Fund came into existence with the promulgation of the Employees’ Provident Funds Ordinance on the 15th November, 1951 and later it was replaced by the Employees’ Provident Funds Act, 1952. The Act is now referred as the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 which extends to the whole of India.

 The  main objective of this act was to provide Financial security and stability to employees during their Post –employment years. Provident fund is also known as a retirement fund or employees savings scheme.

Applicability and Coverage

In India, According to this Act, any Organisation which employs 20 or more employees, is under an obligation to register  under the PF Act, 1952 and start a provident fund scheme for the employees in  organization.  Organisation with less than 20 employees can also register for the Employees’ Provident Fund voluntarily. It is compulsory for an employee to register for PF if he draws Salary below Rs.15000/-(Basic + dearness allowance) per month. This scheme typically covers both private and public sector employees ,ensuring a wide range of workers can benefit from it.  In this scheme employees contribute 12% of the Basic and dearness allowance while employer’s contribute 13% .Salary here means Basic salary +all types of allowances excluding house rent allowances. For example if an employee draws Rs.10000/-as basic salary Rs.3000/- for house rent allowance & Rs.2000/- for conveyance allowance then the PF will be applicable on Rs.12000/- i.e.Basic salary & on conveyance allowances.  Suppose if an organisation  has 25 workers and out of that 15  nos. of workers salary is below Rs.15000/- and 10 nos. of workers salary is above Rs.15000/- then the PF will be applicable only on 15 nos. of workers only.

Benefits for Employees

1. Retirement Security: The primary benefit of a provident fund is to create a financial cushion for employees during their retirement years.It ensures that individuals have a stable source of income when they are not in employment. This financial security helps them to maintain their lifestyle ,meet essential expenses and pursue their passions without any financial stress.

2. Long term Savings: A provident fund generates a long term savings automatically by deducting a portion of their salary along with their employer shares and contributing it to the fund.This discipline approach helps employees to generate a big fund when they retire.

3. Tax advantages: This scheme also helps in reducing the tax liabilities of the employees who have the taxable income. With present slab an employee can save tax upto Rs.150000/-(Only on employee share of contribution)if he follow the old Income tax computation schemes in which deductions u/s 80C are allowed.

4. Portable and Transferable: Now Provident fund accounts are in portable nature.When an employee change the jobs he can transfer electronically his accumulated fund amount from one employer to another employer instead of withdrawing the funds.

5. Loan against PF: An employee can also take the loan from his PF account for purchase or construction of house, Education , Own marriage and for of his children marriages, critical illness ,purchase of plot,and renovation of home etc. subject to fulfilment of required conditions which are applicable for each type of loans.

Conclusion

Provident fund schemes play a vital role in ensuring the financial well –being of employees, particularly during their retirement years. Because of compulsory contributions both by the employers and employees , these schemes provide a long –term savings platform that offers retirement security and encourages a culture of savings in employees. With their portability ,tax advantages ,loans and additional benefits, provident funds serve as a reliable instrument for individuals to build a substantial corpus for their future needs. Governments and employers a like should continue to recognize  the importance of provident funds in safeguarding the financial interests of their workforce and promote the widespread implementation of scheme.

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