How Does Provident Fund Work? Know the Steps Involved

How Does Provident Fund Work? Know the Steps Involved

A Provident Fund or EPF (Employees Provident Fund) is an investment option that allows salaried individuals to save a part of their income in their PF account. An equal contribution is made by the employer as well and the accumulated amount is given to you after retirement.  

However, you can also withdraw your PF partially if you have remained unemployed for over 2 months after leaving the organization. If you get employed in another organization soon after leaving the previous organization then you can continue to contribute towards the same PF account by providing the necessary details to your new employer. 

Here’s how the provident fund works:

You cannot open the PF account on your own. It is your employer who will have to provide an account opening form and once you submit it after filling in the required details, it is sent to the EPFO.

The form gets processed in the EPFO and a PF number is generated. Once the PF number is generated you will have to deposit a fixed amount in it every month and an equal deposit will be made by your employer as well. 

You can check your accumulated PF savings by activating the UAN (Universal Account Number) that is provided by the EPFO. The UAN will be mentioned in your pay slip but if it is not mentioned then you can ask it from your employer. 

You will need to activate the UAN by visiting the official website of EPFO during which you will have to provide some details like PAN Card details, AADHAAR number, etc. 

After 6 hours of the UAN activation, you can check your PF balance. 

The EPF rate is high and gets revised after every three months. However, it is more suited for your long term plans. Also, its withdrawal policies are quite strict especially when you wish to withdraw it during employment.

If you wish to avail high interest rates along with the stability of returns and flexibility in terms of tenor and withdrawal, you can invest in a company FD like Bajaj Finance FD. It not only offers a high FD interest rate of up to 6.85% but it also allows you to pick a tenor between 12 and 60 months as per your choice. 

Premature withdrawals are permitted and only a nominal penalty is charged for that. You can monitor your investments online by using its customer portal named Experia. 

In case of emergencies, you can apply for a loan as it offers a loan against FD. Moreover, you can use your deposits for earning a regular income by investing in non-cumulative FD. The cumulative FDs do not give away interest in the form of periodic payouts. Therefore, the interest that is calculated in the previous interest calculation cycle gets added to the principal during the next cycle. This along with the high FD rates enables you to earn compounded returns on maturity. 

An extra 0.25% FD rate is offered to senior citizens and non-seniors will get an additional FD rate of 0.10% upon investing in Bajaj Finance FD via an online FD form. It is a safe instrument as it has received the highest ratings by credit rating organizations for securing the investment of its depositors.

EPF (Employees Provident Fund) which is also known as PF enables you to save a fixed amount of your salary each month. The best part about it is that an equal contribution is made by your employer as well. However, its withdrawal policies are a bit complex and it is more suited for your long term fund requirements. If you want to earn at a high rate of interest while keeping the option of premature withdrawal open, then you can invest in a corporate fixed deposit like Bajaj Finance FD. It offers a high FD rate and allows premature withdrawals as well. Moreover, you can apply for a loan against FD without any collateral whenever you require funds urgently. While you can check provident fund online (PF balance), you can even keep a track of your FDs online using Bajaj Finance’s customer portal called Experia. 

Author Bio:

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at  Highlight Story.