What are Provident Funds?

Provident Funds
Provident Fund is like a recurring deposit account or saving bank account belonging to
employee. Employee as well as employer deposits a particular agreed amount to such
provident fund account every month. Provident fund account earns interest which is
credited to the account. It grows at a rapid rate because it is entitled to get compound
interest. When the employee retires, whatever is the credit balance to his account will be
paid over to him.
The provident funds are of three types :
i) Statutory Provident Fund (for government employees)
ii) Recognised Provident Fund
iii) Unrecognised Provident Fund (managed without Government backing)
Thus, at any time, the balance in a PF A/c consists of:
(i) Employees’ contribution
(ii) Employer’s contribution
(iii) Interest on both contributions.