New to Provident Fund? Here's an Informative Article That Might Help You

Hi, I came across an article on Provident Fund and found it informative. It may be helpful for newcomers.

Regards,
SanjogK

When will we get the PF registration? Based on the employee strength, we are planning to obtain PF registration. Please reply as early as possible.

Dear Sanjok,

It may be informative, but with a lot of wrong information.

1. "If you don't want a pension from EPF, you can get the EPS money as a lump sum along with your PF balance."

One-time withdrawal benefit is for those who have a pensionable service of 6 months and above up to below 9 years and 6 months only. If the pensionable service is more than 9 years and 6 months, there is no provision to get withdrawal benefit.

2. "Pension amount will be reduced by 2% for every year (below the age of 58 years) ... your pension will be reduced by 16% (for 8 years)"

The rate of reduction on the pension for below the age of 58 years is 4%, not 2%. Also, it is not a flat rate, i.e., 8x2=16 or 8x4=32. But the calculation of the pension for the age of 50 years is (0.96) to the power of 8 = 0.7214 or 72.14%. That is a reduction of 100-72.14=27.86, but not 32.

3. "If you die while you are employed ..., your legal heirs will be entitled to a pension, which is a maximum of Rs. 1,000 per month (Rs. 750 for the spouse and Rs. 250 for two children ...). However, you should have put in a minimum of one month of service ..."

w.e.f 28.9.2001, the maximum widow pension as per Table C is Rs. 2051, and children's pension is 513x2 = 1,026 (if there are 2, below the age of 25 years), which will be added to 2051+1026 = Rs. 3077. Also, even though the scheme stipulates that one month's contribution is required to get a widow pension, practically one day of attendance will do after getting registered with EPF.

4. "According to the new rule, your cover amount (EDLI) is higher of the two: 20 times the average wages of the past 12 months (up to Rs. 6500 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."

Determination of the amount: whichever is less of the following two: a) the average PF accumulation in the last twelve months, b) the average PF accumulation in the total service.

After determining the above amount, up to 50,000 will be actual, and above 40% subject to a ceiling of Rs. 1,00,000. (A)

20 times of the salary subject to a salary ceiling of Rs. 6500. (B).

Whichever is higher of the above (A) & (B) will be taken as the EDLI compensation.

Abbas. P.S, ITI Ltd, PALAKKD - 678 623.

Ph. +91 9447 467 667

Hi Abbasiti and SanjogK, thank you for sharing the valuable information. I request Abbasiti to please explain point 4 with an example to make it easier to understand. Thanks.

Regards,
Satpreet Kaur

The PF accumulations will start with low investments at the beginning and end with high amounts, provided no non-refundable loan is taken. If a loan is applied, the figures will change again.

Suppose a member has 5 lakh rupees in his account at the end of service. Let his average accumulation for the total service be Rs. 2 lakhs and Rs. 3 lakhs for the last 12 months. Out of the above two, whichever is less, i.e., Rs. 2 lakhs, will be taken for calculation.

Out of the Rs. 2,00,000, for the first 50,000; EDLI is actual, i.e., 50,000 - (1). For the balance 1,50,00, EDLI will be 40%, i.e., 60,000 - (2). (1) + (2) = 1,10,000. But the ceiling for the above calculation is Rs. 1,00,000 - (A). Let his salary be:
i) Rs. 4000
ii) Rs. 5000
iii) Rs. 6500
iv) Rs. 8000

20 times the salary will be - (B)
i) 80,000
ii) 1,00,000
iii) 1,30,000
iv) 1,60,000

As there is a ceiling limit of 1,30,000, serial (iv) will also be treated as 1,30,000.

Hence, whichever is higher will be:
i) 1,00,000
ii) 1,00,000
iii) 1,30,000
iv) 1,30,000

According to the above 'Times of India' calculation, it will be 50000 + (450000 x 40%) = 50000 + 180000 = 2,30,000!

Abbas.P.S

Dear Mr. Abbas,
This is regarding the reduced pension at the age of 50. There is also an advertisement in the newspaper regarding a reduction of 2% every year. Kindly go through it and suggest whether it is 2% or 4%.

Regards,
Rakesh Mongia

As per 12(7) of the Employees Pension Scheme-1995, the rate of reduction of pension for every year the age falls short of 58 years is revised from 3% to 4% vide GSR No. 688(E) dated 26.9.2008, w.e.f 26.9.2008. Accordingly, the information provided in the above article of the Times of India in this regard is not correct.

Kindly clarify with the provisions of the Scheme, not with the paper cuttings.

Abbas.P.S

Good Morning Abbas ji,

Very much illustrative information on PF.

As regards the Pension scheme, I seek further clarification on the following situation:

1) An employee from the Textile Industry resigns after a service of say 20 years (Age 40 years) who receives a Pension Certificate of Rs 450/- from the PF Office, which will start at the end of 58 years. PF amount is also withdrawn.

2) The said employee joins another industry. At the age of 58 years, he will also get a pension certificate.

Now, I need your advice on how to get benefits from the two pension certificates. The earlier certificate is not produced to the present employer.

Can the said employee avail both the pensions? Is it allowed by the PF Authority?

Please guide on the above issue.

Thank you, with warm regards Chandrakant

[QUOTE=cvh;1464698]

Good Morning Abbas Ji,

Thank you for providing very illustrative information on PF. I am seeking further clarification regarding the Pension scheme in the following scenario:

An employee from the Textile Industry resigns after a service of, let's say, 20 years (at the age of 40), and receives a Pension Certificate of Rs 450 from the PF Office, which will commence at the age of 58. The PF amount is also withdrawn.

Subsequently, the same employee joins another industry. At the age of 58, he will also receive a pension certificate from the new employer. However, the earlier certificate is not presented to the present employer.

I would appreciate your advice on how to avail the benefits of both pension certificates. Is it permissible by the PF Authority for the employee to receive both pensions? Please provide guidance on this matter.

Thank you and warm regards,

Chandrakant

The said employee must submit the previous scheme certificate to EPFO through the present employer. EPFO will consolidate the two pensionable services. The consolidated pension amount will be calculated based on the total service and the average of the last twelve months' salary. It is important to note that EPFO does not allow an individual to receive two separate member pensions.

Abbas P.S.