6 PROVIDENT FUND SECRECTS

Youve always thought of it as a mandatory cut in your salary or a safe instrument for long-term savings, but your provident fund contribution entitles you to several benefits such as insurance, pension and much more.

I.

Your EPF entitles you to Pension too:

Despite the popularity of the EPF as a saving tool, not many people are enthused by or even aware of the employees pension scheme. Introduced in 1995,it is funded by diverting 8.3%, or a little more than a third of your PF contribution. The Pension on retirement is linked to the number of years in service and the average salary drawn in the year before retirement. The scheme has failed to draw the EPFos 5 core members because of the measly payouts associated with it. The reason is that since most employers pay PF only on the mandatory salary cap of RS.6,500 per month, the pension income for a majority of workers is abysmally low-at times, less than RS.1,000 a month. It is possible to get a higher person income. Good employers like Infosys pay provident fund contributions on the entire basic salaries, says SC Chatterjee, the central PF commissioner, If your basic pay is RS. 30,000 a month, employers can

invest 24% of this amount into your PF account. You will be entitled to a pension on the basis of your actual basic pay ratherthasRS.6, 500, he adds. For salaries up to RS.6,500, the government also chips in with a subsidy of RS.75.This added up to RS.994 crore for all EPF members in2009-10. Another way smart employers help boost the pension is by raising the workers salary in the last year of employment. Suppose I earn RS.25,000 and contribute 8.33% towards EPS. However, on my 57th birthday, my employer can raise my salary to RS.1 lakh, I can get a pension of around RS.50,000.soyou can get twice your original salary as pension, says Chatterjee. However for this happen, the employers should have contributed his share to the provident fund on the actual basic salary, not the mandated limit of RS.6,500 for the entire service period. Thought this is not fair to other workers who are part of the of the pension pool, the pension schemes design makes this manipulation possible. If you dont want pension from EPF, you can get the EPS money as a lump sum along with your PF balance. The benefit will not be linked to the actual contributors made, but to your last average salary and the number of years in service.

II.

Insurance Benefits:

Besides a monthly stream of income, the EPF subscription entitles you to an insurance cover on your life through the employees Deposit Linked Insurance (EDLI) scheme. For this, your organization contributes 0.5% of your monthly basic pay, capped at RS.6,500, as premium. Till recently linked to the balance in your PF. According to the new rules, your cover amount is higher of the two: 20 times the average wages of the past 12 months (up to RS. 6,500 per month) that is RS.1,30,000, or the full amount in your PF account up to RS.50,000 and 40% of the balance amount.

III.

Claim Interest on Withdrawn Amount:

The EPF rate has to be declared at the beginning of every financial year so that all members withdrawing or retiring from the system through the year get in the interest that is due to them. But in recent years, the EPF rate has become a matter of prolonged political debate and is often declared and notified much after the end of the financial year. Till the rate is notified for a particular year, workers withdrawals are credited at the previous years rate. For instance, in 2010-11, the labour Ministry announced a rate of 9.5%, but

it is yet to be notified. So, lakhs of workers, whose PF claims have been settled so far, have lost out on the 1% increase over last years rate of 8.5%. The central PF Commissioner admits this is a problem, but has promised that his department will pay the difference to all affected members. If you have withdrawn your PF balance during this year while the government hasnt notified the PF rate, you can approach your PF office later to pay you the higher interest rate on the balance, say Chatterjee. If, on the other hand, your claim is not settled within 30 days of applying you can move the court. If it is established that the delay was due to inadequate reason, you will be entitled to an interest on the balance the rate of 1% for every month of delay. IV. Use EPF to Fund Following:

Running short of funds to buy a house? Or perhaps your childs education cost is more than you had planned for? At such times, its easy to fall back on your EPF savings. While you cant withdraw the entire corpus, you can do so partially for specific occasions, such as childrens education, marriage, or for buying property. Find out when you can avail of this facility, the amount you can withdraw and the conditions you need to fulfill. 1. Marriage or Education: Of self, children or siblings
You should have completed a minimum of seven years of

service. The maximum amount you can draw is 50% of your contribution (12% of the basic salary). You will have to submit the wedding invite or a certified copy of the fee payable to the educational institution.

2. Medical Treatment: For self or family (spouse, children, dependent parents) You can avail of it for major surgical operations in a hospital or by those suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailments.

 The maximum amount you can draw is six times your salary or the entire contribution made by u till date, whichever is less.
You must show proof of hospitalization for one month or more with

leave certificate for that period from your employer. You must also prove that you are not a member of the employees state Insurance Corporation or are unable to use its facilities for surgery / treatment. 3. Constructions or Purchase of House or Flat/ Site or Plot: For self or spouse or joint ownership You should have completed at least five years of service. The maximum amount you can avail of is 36 times your wages. To buy a site or plot, the amount is 24 times your salary. Can be avail of it just one during the entire service.

4. Repay a housing loan: For a house in the name of self, spouse or owned jointly You should have completed at least 10 years of service.
You are eligible to withdraw an amount that is up to 36 times

your wages.

5. Alteration/ Repair of House:

For house in the name of self, spouse or jointly

You need a minimum service of five years(10 years for repairs)

after the house was built/ bought. You can draw up to 12 times the wages, only once.

6. Damage due to: Natural calamity You can withdraw up to 5,000 or 50% of your contribution to the PF. You have to apply within four months of the calamity. A certificate of damage from the requisite authority and a calamity declaration by the state government. 7. Equipment purchased: By physically handicapped employees
You can withdraw up to six months basic salary and dearness

allowness, or your share of PF contribution with interest, or the cost of equipment. You will have to submit a medical certificate. V. Premature Withdrawal: Under the EPF Act, you cannot withdraw the full amount in your provident found account before the age of superannuation. However, if you suffer permanent and complete disability or are moving abroad to settle, you can withdraw this amount. It is also possible to do so in case of mass retrenchment by the employer. If, however, you retire voluntarily before you are 55 years old, you cannot withdraw the full amount. Under normal circumstances, you can withdraw up to 90% of the fund amount after you turn 54 or within one year of retirement or superannuation.

VI.

Grievances Addressed:
The EPF organization has a grievance redressal mechanism and it is covered under the consumer protection ACT. The process is simple. Log onto http:// epfigms.gov.in/ and file your grievance. Since late last year, the EPFO has become a part of the centralized public Grievance Redressal and Monitoring

system, which allows you to register and track status online. Its centralized system and complaints are monitored by the head office. We reply to all the grievance within 30 days of their receipt. If someone is not satisfied, he/she can come and meet me, says Chatterjee.