This is a retirement savings scheme where both employees and employers contribute equally. The scheme, run by the Employees’ Provident Fund Organization, helps employees stay financially secure after retirement.

If you invest in a PF account, you should understand the power of compounding. It is a great way to build a large fund for retirement. If you have an EPF account, there are some important details you should know. In this article, we will share all the essential information about it.

Financial Security After Retirement

This is a retirement savings scheme where both employees and employers contribute equally. The Employees’ Provident Fund Organization runs the scheme to help employees stay financially secure after retirement.

The Magic of Compounding in a PF Account

When you invest in a scheme, you receive either simple or compound interest. Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal amount and the interest already earned. This leads to your money growing much faster over time.

How Much Investment Should Be Made?

In the PF scheme, both the employee and the employer contribute. Employees contribute 12% of their salary to the PF account, and the employer contributes the same amount. However, 8.33% of the employer’s contribution goes to EPS, while 3.67% goes to EPF.

The interest rate is determined by the government and can range from 8% to 12% per year. The interest is calculated using compound interest, meaning your savings grow more quickly with each monthly contribution.

When Can You Withdraw Money?

You can easily withdraw money from your PF account after retirement. There are also situations where you can withdraw money earlier:

  • If you are unemployed for one month or more, you can withdraw about 75% of your PF amount.
  • If you are unemployed for two months or more, you can withdraw the remaining 25%.

Partial Withdrawals from PF Account

There are certain situations when employees can make partial withdrawals from their PF account:

  • After completing 7 years of service, employees can withdraw up to half the amount in their PF account for education.
  • Employees can also withdraw money for marriage after completing 7 years of service, and in this case, up to half the amount can be withdrawn.
  • For health-related expenses, employees can withdraw up to 6 times their monthly basic salary or the total amount, including interest, in their PF account—whichever is less.

Who Can Open an EPF Account?

An EPF account can only be opened by employees working in organizations covered under the EPF Act. Retired or self-employed individuals cannot open an EPF account. However, for such individuals, investing in a Public Provident Fund (PPF) can be a good option. The PPF is a voluntary savings scheme open to all Indian citizens.