What is PF (Provident Fund)? Meaning and Example

How PF (Provident Fund) works

Both the employee and the employer contribute 12% of the PF wage (basic pay plus dearness allowance). Your 12% goes fully into the Employees' Provident Fund (EPF). Of the employer's 12%, a slice of 8.33% (capped at wages of ₹15,000, so about ₹1,250) goes to the Employees' Pension Scheme (EPS) and the rest to EPF. The balance earns interest each year.

Example. On a PF wage of ₹20,000, you contribute ₹2,400, and your employer contributes ₹2,400, split as ₹1,250 to EPS and ₹1,150 to EPF, so ₹4,800 goes into your PF accounts that month.

Why PF (Provident Fund) matters

PF is a forced saving that builds a retirement corpus and a pension, and it is a statutory deduction, so an employer with 20 or more workers must deduct and deposit it on time or face penalties.

Frequently asked questions

Is PF deducted from CTC or salary?

The employee PF is deducted from your gross salary, while the employer PF is part of your CTC but not paid to you in cash. Both are 12% of the PF wage.

Can I withdraw my PF?

Yes, PF can be withdrawn on retirement, or partially for specific needs, and transferred when you change jobs using your UAN.