However, if the employee wants to contribute more than 12 per cent of the basic then he/she can do so. Employee contribution can be increased to 100 per cent of (basic + da) depending on his/her convenience.
But the employer cannot contribute more than 12 per cent. Employer's contribution remains fixed at 12 percent even if the employee decides to contribute more towards EPF.
Know here the benefits of having an EPF account.
EPF is considered as one of the most tax friendly tool that builds your retirement corpus. If you work continuously for consecutive five years and then decide to withdraw then the amount is totally exempt from tax under section 80C of Income Tax Act.
Click here to read whether EPF amount is taxable upon withdrawal?
For the financial year 2015-16, the rate of interest was declared at 8.70 per cent making EPF a higher yielding investment option. By September this year, Employees' Provident Fund Organisation (EPFO) has decided to make all payments to beneficiaries through electronic mode.
To channelise household savings into capital markets, SEBI and top stock exchanges in India have requested the new Central Government to allow a portion of the corpus in equities and mutual funds.
SEBI has suggested to invest a part of Rs 5.5 lakh crore of the money managed by EPFO in equities and mutual fund. Bombay Stock Exchange has also requested that the pension fund should be assessed to both primary and secondary markets. They have already begun investing through ETFs.
At present, the corpus is also being invested only in secured instruments like debt securities. SEBI has also said that necessary provisions can be put to safeguard the retirement corpus if the government allows the money to be invested in risky assets.
SEBI and exchange broads of India have requested the government to allow to invest up to 15 per cent in equities and mutual fund. According to BSE, this will result in generating higher returns for the retired.
So, if you are employee and want to contribute 30 per cent of your basic salary towards EPF you can do so. It is advisable to have an EPF account as it is tax friendly and gives higher returns.