Provident Fund or PF (PF) or provident fund either Provident FundGenerally, every salaried person must be familiar with these words, because this is the amount with which most of the salaried people plan their life after retirement. They were also able to become dependent on PF, and that too after retirement, and many also joined PF to get their dear daughters married.
Also Read: What Is Gratuity, How It Is Calculated – Know Everything
But the reality is that many of our working colleagues are often confused about how much PF should actually be deducted, how much amount is getting deposited in their PF account, how much annual savings are being made in this account. PF That is, how much interest will they get on this amount, and how much will they benefit in terms of income tax from the deduction in the head of PF.
Also read: Income Tax Guide: How to calculate HRA, i.e. exemption on house rent allowance…
How much PF should be deducted?
Generally, the basic salary item is definitely there in the salary of a person working in any government or private job. So, 12 per cent of the basic salary (and the sum of basic and DA, ie dearness allowance in the case of government employees) is deducted from your salary, ie salary, as PF. This percentage applies to companies that have more than 20 employees in total.
Also read: If you pay rent to parents to get HRA exemption, then be careful…
How much amount got deposited in your PF account?
The entire amount of deduction in the PF account from the salary of those doing private jobs is deposited in the PF account, the employer also has to pay the same amount on his behalf, out of which about 30 percent, that is, of the basic salary. 3.67 per cent is deposited in your PF account, and the remaining 8.33 per cent is deposited in your pension account… Apart from this, the employer also deposits half a percentage of the basic salary for Employees’ Fund Linked Insurance (EDLI), and In the administrative account of PF also he has to deposit 1.10 percent and 0.01 percent for EPF and EDLI respectively. That is, in the PF and pension accounts of the employee, 24 percent of his basic salary is deposited every month. In the case of the central government, the government deposits only 1.16 percent of the amount in the EPS account of the employee.
How much is being saved in the employee’s account every year…?
There is a simple math to this. Whatever part of the employee and the employer will be deposited in the EPF account of the employee, he is given interest at the rate of 8.5 percent annually till the financial year 2019-20.
VIDEO: How to Link Aadhar Card Number with PAN Card
How much will be the benefit in income tax?
Whatever amount is deducted from the salary of the employee under the head of PF, it is considered as his savings, and out of that, the amount up to Rs 1,50,000 lakh is tax-free, that is, tax-free. This means that if you earn so much that you have to pay income tax at the rate of 30 per cent, then you can earn Rs 46,800 including tax (45,000) and cess (1,800) on deduction up to Rs 1,50,000 towards PF. You can save income tax.