Union Budget 2024: In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman may announce a hike in the existing Provident Fund (PF) limit to Rs 25,000, CNBC Awaz reported.
The budget is likely to be presented later this month.
What is a Provident Fund?
Provident Fund is a government scheme aimed at providing social security to employees. The Employees’ Provident Fund (EPF) Scheme, 1952 says that an employee of a certain covered establishment (with monthly wages up to Rs 15,000) is mandatorily required to join the fund and have to contribute 12 per cent of their wage that includes basic wages, dearness allowance and retaining allowance, if any.
Similarly, the employer also needs to contribute 12 per cent of the wages in the fund. The fund is managed by a board of trustees having representatives from Centre, state governments, employers and employees.
For the employees with wages exceeding Rs 15,000, opting for PF is voluntary. However, if the current threshold is increased to Rs 25,000 in the upcoming budget, the new set of employees under the scheme may witness some changes in the flexibility of managing their finances.
What are the benefits of Provident Fund?
The employees enrolled under this scheme can withdraw the accumulated funds for several purposes including purchasing or constructing a dwelling house, bearing medical or educational expenses as well as marriage related expenses.
Since the pandemic, the scheme’s provisions also allow the employees to withdraw funds for Covid-19 related expenses.
For those accumulating the PF over time, receive an annual interest credit on their savings, which contributes to the long-term financial security of the employees.
What happens to operative PF accounts?
The Centre explains that certain accounts that turn inoperative, have definite claimants. ‘Definite claimants’ are individuals or entities with an established right to claim benefits and compensation.
As of March 2022, the total amount in inoperative accounts is Rs 4962.70 crore, the Centre had said.