Provident fund is the amount which is received by the employee from its company in lump sum. Major Private and government companies of world have the system of provident fund for their employees so that at the time of the retirement employee can get that amount and can easily spend his rest of the life. Employees are the backbone of the companies and without employees, hard work companies cannot get the peak in the business so that to provide an excellent facility of service at the time of retirement companies pay their employees a healthy amount of money so that they can use it in their life. PF full form is commonly used in the major companies where a large number of employees are working but for the common men who is not connected with the companies does not know about the PF full form. To resolve this issue I will explain each and everything about the PF full form in this article.
PF Full Form-Provident Fund
PF full form is Provident Fund. It is another name for the pension which is received by the employee of a company at the time of exit from the company or you can say that at the time of retirement and the amount of provident fund is in the form of lump sum. There are some differences between the provident fund and pension fund and I will describe all the differences later in this article. There are several benefits of this fund to the employee and this system is acquired by almost all the major companies which have a large number of employees. Employee is the first priority of any company because without the dedication of employee towards the specific job a company cannot get the benefits and cannot compete in the field of business. In India there are many companies who provide these facilities to their employees. In the provident fund an employer deducts a specific amount of money from the monthly basic pay of the employee and stored into the separate account and at the time of retirement, this money will be paid to the employee in a form of lump sum. In India this plan of provident fund is set by the EPFO (Employee’s Provident Fund Organization).
There are some rules and regulations of the organization which are being followed by the private companies and there is specific amount of money set by this organization which is deducted from the salary of the employee every month and the amount of deduction is depend upon the salary of the employee. Similarly, every country has the organization in a country who decides the rules and regulations about the retirement plans of the employees. The benefit of this fund as the PF full form (Provident Fund) is that, an employee can easily spend his life after the retirement from the company and he can invest this money into another business so that he can manage to live in that country without any worry. Another term which also falls in the category of two funds such as pension and PF is a gratuity. Gratuity is the amount of money or beneficiaries provided by the company to the employee in a case of best performance and it is a type of reward which is awarded to the employee on the time of retirement and this includes a defined benefit plan for the employee by a company. The system of these funds which are awarded to the employee is different regarding the availability of money to the employee at the time of exit from the company. After the complete discussion of PF full form now you will know the different types of provident fund.
Types of PF:
There are some different types of provident fund which are discussed below.
- Statutory Provident Fund: It is a provident fund which is received by that person who is a government employee in the government departments such as university, college or any other department. The amount of this person is completely exempted from the Tax issues.
- Recognized Provident Fund: This fund is attached to that company or organization which has more than 20 employees. The funds received by the employees are recognized by the Tax Commissioner. If the employee of the organization is working from more than five years then the amount of that person will totally exempt from the Tax. There is another case in which the amount of the person will totally exempt from the tax, if a person is working from less than five years but the termination of the person is due to illness or disability.
- Unrecognized Provident Fund: This fund is not recognized by the income tax commissioner and the fund received by the employees of an organization will be from tax issues.
- Public Provident Fund: This provident fund is for the self-employed person who can collect his money for the end time of his age and this money is completely exempted from the Tax.
Differences of Provident Fund and Pension Fund
- In the provident fund both employer and employee contribution is involved and at the time of retirement employee get the fund in the form of lump sum while in the pension fund an employer contributes the amount and at the time of retirement employee get that money whether in the form of lump sum or in the monthly income form.
- In the provident fund both employee and employer make a contribution for the collection of money at the time of retirement while in the pension fund employee is not included and central government and employer is involved for the collection of money.
- Provident fund is always received in the form of lump sum while the pension fund is received in the monthly income form or in the form of lump sum.
- A person can withdraw all of the money at one time after the retirement while in the pension fund case only one-third of the money can be received by the employee.
If a person wants that he is not able to contribute in the provident fund then he can receive his full amount after some legal procedures.