Question 1

Why is the employer contribution in the fund so much smaller than mine?

Accepted Answer

Because a large part of the employer’s 12% never reaches the fund. It is diverted to the pension scheme every month, capped at the statutory amount. Your own 12% goes entirely into the fund. That is why the two columns look so lopsided, and it is the single most confusing thing about a PF passbook.

Question 2

Is the diverted money wasted?

Accepted Answer

No, it buys the pension. This page prices that: it shows how many years of pension it takes to get back everything that was diverted, undiscounted. On the ceiling wage that is usually under five years, after which the pension is clear gain for as long as you live. Whether that beats the same money compounding in the fund depends on how long you live, which is exactly the trade a pension is.

Question 3

What is the wage ceiling and should I turn it off?

Accepted Answer

Contributions are computed on ₹15,000 a month unless the member and employer have opted to contribute on the full wage. Most members are on the ceiling. Turning it off here models the higher-pension option, which is a real election with real extra contributions, not a preference. It moves both the lump sum and the pension, by very different proportions.

Question 4

What is EDLI and why have I never heard of it?

Accepted Answer

Employees Deposit Linked Insurance is life cover that comes with your PF membership. The employer pays for it, you contribute nothing, and it pays a lump sum to your family if you die while in service. It is capped in two separate ways, so beyond a point neither a higher wage nor a bigger balance raises it. Most members never learn it exists, which is the main reason it is on this page.

Question 5

Why does the pension use a future wage?

Accepted Answer

Because the scheme computes it on the average of the last sixty months of pensionable pay, not on what you earn today. Reading the EPS page in isolation and typing in today’s wage understates the pension by every year of increments between now and retirement. This page projects the wage forward for you.

Question 6

Does this include tax?

Accepted Answer

No. The EPF corpus is exempt once you have five years of continuous service and taxable before that. The pension is taxed as ordinary income at whatever slab applies when it is paid. The EDLI benefit is exempt. The figures here are all before tax, so the pension in particular is a gross number.

What Your PF Gives You