Employee Provident Fund (EPF) is a vital scheme for salaried individuals in India, providing them with financial stability upon retirement. The fund is contributed by both the employee and the employer, with the employer contributing 12% of the employee’s basic salary. These contributions are divided into two parts: 8.33% towards the Employees’ Pension Scheme (EPS) and 3.67% towards the Provident Fund (PF). However, what transpires to these funds when an employee decides to resign from their position?
Status of EPF After Resignation
When an employee resigns, their EPF account does not cease to exist. The contributions made by both the employee and employer remain intact, and the accumulated amount continues to earn interest, which is set by the Government of India and is currently at a rate of 8.15%. This interest rate, however, is subject to change annually based on the economic landscape and the requirements set forth by the regulatory authorities.
Withdrawal of EPF Post-Resignation
Upon resignation, an employee has the option to withdraw the entire provident fund balance if they have been unemployed for over two months. It is important to note that withdrawing EPF before the completion of five years of continuous service may attract tax implications on the employer’s contribution to the EPF and the interest accrued thereon. However, withdrawals made after five years are tax-free. To initiate this withdrawal, employees can use the EPF withdrawal form, which can be submitted online via the Unified Member Portal or offline. The EPFO has made significant strides in digitizing the process, making it easier for users to claim their money.
Transferring the EPF Account
An employee might also choose to transfer the EPF account to their new employer if they join another organization post-resignation. This ensures the continuation of their savings without any withdrawal, granting them the benefits of compound interest. Transferring the account is relatively straightforward and can be completed via the EPFO website with the help of a Universal Account Number (UAN), which is unique to each subscriber.
Using PF Calculators for Estimation
For those interested in the precise amount of accumulated funds, a PF calculator online can provide valuable insights. Using such a tool allows employees to understand the corpus accumulated including contributions from both the employer and employee along with the interest accrued thereon. It’s important to verify input details such as the basic salary and length of service to get a precise estimate. These calculators help employees make informed decisions regarding withdrawals or transfers.
Employees’ Pension Scheme (EPS) Considerations
The role of the EPS must also be delineated. Upon resignation, if an employee completes at least ten years of service, they become eligible for pension benefits under EPS. However, if they choose to withdraw earlier without completing the stipulated ten years, they receive the accumulated amount from the EPS without the pension benefits. This scheme offers a monthly pension based on years of service, providing a reliable, consistent income in the post-retirement phase.
Conclusion
The employer’s contribution to PF continues to retain value even after resignation. Employees can elect to withdraw their entire provident fund balance or transfer the account to a new employer if they join another organization. Such decisions should be prudently made, considering the financial implications and tax regulations. Using a PF calculator online can aid individuals in understanding the magnitude of their savings, facilitating better financial planning and efficient resource management.
Disclaimer: The information provided in this article is for general understanding and should not be considered financial advice. Investors are encouraged to weigh all pros and cons and consult a financial advisor before making any investment decisions in the Indian financial market.
Summary
Employee Provident Fund (EPF) primarily comprises employer contributions along with employee contributions to secure financial aid upon an employee’s retirement. Upon resignation, these employer contributions do not vanish. Employees can either withdraw the entire provident fund amount after two months of unemployment or opt to transfer their EPF account to a new employer, which allows them to continue growing their savings. Using a PF calculator online, employees can ascertain the value of their EPF corpus including contributions and interest. This tool is useful for evaluating whether to withdraw funds or transfer them. It’s worth noting that tax implications might arise if withdrawals are made before completing five years of continuous service. Moreover, the Employees’ Pension Scheme (EPS) part of the contribution can become a monthly pension if an employee completes at least ten years of service, offering secured financial benefits post-retirement. Hence, the employer contribution to PF retains its worth post-resignation, allowing employees to make informed decisions about their financial future.
Disclaimer: The information provided is for general information and should not substitute for professional financial advice. It’s essential to understand all potential risks and rewards associated with investments in the Indian financial market before making any decisions.