Employee Provident Fund Scheme : A major vehicle of savings for salaried employees, the provident fund scheme has the following features:
- Each employee has a separate provident fund account in which both the employer and employee are required to contribute a certain minimum amount on a monthly basis.
- The employee can choose to contribute additional amounts, subject to certain restrictions.
- While the contribution made by the employer is fully tax exempt (from the point of view of the employee), the contributions made by the employee can be deducted before computing the taxable income under Section 80 C.
- Provident fund contributions currently earn a compound interest rate of 8.5 percent per annum that is totally exempt from taxes. The interest however is accumulated in the provident fund account and not paid annually to the employee. This results into Long term wealth generation / retirement corpus.
- EPF is not subject to attachment under any court order.
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