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Is It Compulsory To Contribute For Employee Provident Fund (EPF) In India?

When we join a company the company HR make us fill the Employee Provident Fund account opening form. But do you know it is not compulsory for the all the employees to contribute for employee provident Fund? Most of the people have a misconception that if they work for a company then they have to contribute for an Employee Provident Fund. But this is not true, as per the guidelines issued by EPFO, one having basic salary of Rs 6500 per month or more can choose not to contribute for the EPF.

Which simply means if you have a monthly basic salary of Rs 6500 or more than you are not bound to contribute for EPF every month as it reduces your net salary. This gives you freedom to invest your money the way you want like in Gold, Stock Market, Fixed Deposit etc.

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But if you do not want to contribute for EPF then you have to make your HR informed about this at the time of joining the company. As EPF account once opened can not be closed before you resign from the company.

Employee Provident Fund

Disadvantages Of Not Contributing Under EPF
  • You will loose the Employers contribution.
  • You may not make any retirement fund.

But in case you want to contribute for EPF then 12% of your Basic and DA will be deducted from your salary and your employer will contribute equivalent amount to your EPF account every month. You even have a freedom to increase your EPF contribution from 12% of your Basic and DA to any percentage upto 100%. Which is called as Voluntary Provident Fund (VPF) but your employer is not bound to pay over 12% of your Basic and DA.

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By investing under Employee Provident Fund (EPF) you can earn decent interest rate i.e 8.6% for 2012-13 on the amount invested.

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