Contribution of More Than 12% Of Basic Salary Towards EPF

Adding an extra layer of security to your financial fortress means investing more in the Employees' Provident Fund (EPF) than the minimum 12% of your base salary. Typically, employees contribute 12% of their base pay, and the company contributes 13.61% to the EPF. Many employees choose the EPF retirement investment plan because of its several perks. By making a larger contribution than the required percentage might lead to better rewards and a more solid financial base. Let's explore the benefits of deviating from the 12% bracket and going on the path to a more secure financial future.

Key Points About the EPF Contribution

These are the essential key points that you must consider:

• 8.33% of the employer's total payment goes towards the Employee's Pension Plan, while 3.67% goes towards the Employees Provident Fund.
• Every contribution is updated in the EPF member passbook.
• The EPF receives all of the money that they contribute.
• In addition to the contributions mentioned above, the employer must contribute an additional 0.5% to EDLI.
• The employer must also pay a portion of the 1.1% and 0.01% administration charges for EDLI and EPF, respectively. This indicates that the employer must contribute 13.61% of the employee's pay to this programme.

Employee's Share of EPF Contribution

Generally speaking, the employee's contribution rate is set at 12%. For the organizations listed below, however, the rate is set at 10%:

• Companies or organizations with no more than 19 employees
• Industries that the BIFR has designated as sick industries
• Businesses that lose a lot more money each year than they are worth
• Jute, brick, guar gum, beedi, and coir industries
• Businesses that pay employees no more than Rs. 6,500

Employer's Share of EPF Contribution

Employers must contribute a minimum of 12% of the monthly salary, while they are free to contribute more if they want. This implies that a monthly contribution of 12% of the salary must be made to the PF account by both the employer and the employee. It is a long-term investment fund that enables contributors to maintain their independence after retirement.

How can an Employee Contribute More than 12% Towards EPF?

An easy way for a salaried employee to contribute more than 12% towards their provident fund is by using a VPF account. 

The VPF, or Voluntary Provident Fund, is an optional contribution made by salaried employees in addition to their EPF contributions. One of its main benefits is that it's a government-backed savings plan with high returns and minimal risk. It is the employee's voluntarily made financial contribution to their provident fund account. 

The amount contributed exceeds the 12% that an employee is required to contribute to his EPF. Up to 100% of the Basic Salary and Dearness Allowance can be contributed at maximum. The interest rate is the same as that of the EPF.

Employers are not required to make contributions to their employees' VPF accounts. A VPF is an extension of an EPF. The VPF alternative is only available to salaried employees who earn their monthly salaries through a specified salary account.

Benefits of Having an EPF Account

The following are some advantages of owning an EPF account:

• Funds will be deposited until you pass away, retire, or quit your job. Interest will also be payable on the entire deposit made, and you will benefit from a bonus offer.
• Partial withdrawals may help pay for bills related to home construction or purchase, education, marriage, health issues, etc.
• It is the most tax-friendly retirement corpus-building instrument.
• The sum is fully exempt from tax under Section 80C of the Income Tax Act if you withdraw it after working in the same organization for five consecutive years.
• 8.5% is the announced interest rate for this fiscal year.
• EPFO has decided to use electronic means for all beneficiary payments.
• Under EPF, you are eligible for the EDLI life insurance coverage.
• Top stock exchanges and SEBI have asked the incoming central government to permit a portion of the corpus to be invested in stocks and mutual funds to channel the savings.
• Additionally, SEBI has recommended that mutual funds and stocks be used to invest the Rs. 5.5 lakh crore that EPFO manages.
• The EPF funds should be allocated to both the primary and secondary markets, according to a request made by the Bombay Stock Exchange.
• The retired will receive larger returns from their investments with SEBI and BSE.