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I have joined my first job. While discussing about PF, my employer mentioned that both - the employer contribution and employee contribution to PF has to be paid myself.

Is this right ? What does it mean ? It will be deducted from my salary ?

But shown that they (employer) have contributed to PF ? I am new to this. Please explain.

Should I avail PF ? Cant I invest in PF myself not through company?

The company said I have to state my position with regard to PF on letter either ways.

  • What is PF? Which country? – user32479 Jan 6 '16 at 15:02
  • India's Provident Fund is presumably what is being asked about here, though I don't know much about it and don't understand the question in this context. – Joe Jan 6 '16 at 15:32
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Assuming India;

PF is mandatory for basic salary of less than 6500/- and optional for people with salaries above Rs 6500/-.

Quite a few companies give the option of opting in or out of the PF scheme to individuals.

he employer contribution and employee contribution to PF has to be paid myself.
Is this right ? What does it mean ? It will be deducted from my salary ?

It depends on how the salary is shown by a company. Some company may show the salary of Rs 1,00,000/- and Employer's contribution as say Rs 10,000/-. So in effect you get 90,000/-. [i.e. Rs 1,00,000 less of your contribution of Rs 10,000]. Total amount deposited to PF office to your account Rs 20,000.

Some companies would show your salary as Rs 1,10,000/- as say that Rs 10,000/- of employer's contribution and your contribution comes out of it. So effectively Rs 90,000 [Less of 10,000 as employers contribution and Rs 10,000 as your]. Total amount deposited to PF office to your account Rs 20,000.

So yes in your case it will be deducted from your salary.

Should I avail PF ?

This is an individual choice and opinion.

Cant I invest in PF myself not through company?

The similar risk free schemes are NPS or PPF Schemes. You can invest on your own in these schemes. There are difference in tax treatment to these schemes.
The tax benefit of upto Rs 150,000 are available for NPS, PPF or your contribution on Company PF.
The Company contribution is additional to above limit. Thus if you are getting a annual PF of say Rs 1,50,000 and a company's contribution of Rs 1,50,000. If you go with the company scheme; you will save tax on entire Rs 3,00,000/-. However if you invested this amount on your own, in PPF you can invest only Rs 1,50,000 and the remaining is taxable. In NPS you can invest Rs 3,00,000 however the tax benefit is only upto Rs 1,50,000. Thus this will be less tax efficient.

Of course you can invest in other instruments if you feel your can get the returns of the risks taken.

Few years back the PF accounts were not managed properly; i.e. quite a few people would forget the account number when they change jobs, etc. Close to 10% of the funds in PF are unclaimed. i.e. people have forgotten about the money. There was no periodic statement. However recently there is lot of changes in PF, with a Universal Account Number, so you have better visibility.

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In India, usually the employer states the employer contribution and employee contribution is part of CTC. This is just to artificially inflate CTC amount.

So, ideally both the amounts will be deducted. You have 2 choices. Opt for PF or Opt out. If you Opt, both the the amounts will be deducted. IF you Opt out, You will get both the amount in your salary. In this scenario, employer contribution will be taxes as now it is part of your salary. If you need to save the tax and enjoy the same benefits, you will need to invest the amount in PPF (public provident fund).

You can also invest the amount in stocks, MFs, etc. But, that's another question.

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