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A Provident Fund (PF) in Pakistan is a type of retirement savings scheme generally structured to provide financial security to employees when they retire. The employer and employee contribute to the fund during the employee’s working years. Here's a breakdown of how it works: 1. **Contributions**: -The employer and the employee contribute a specified percentage of the employee's basic salary to the provident fund. The contribution rates may vary by organization, but typically, it ranges between 5% to 15% of the basic salary for both employer and employee contributions. 2. **Interest**: The contributions made are invested in various government-approved schemes, and the returns on these investments (interest) are credited to the employee's provident fund account. 3. **Withdrawal**: The employee is allowed to withdraw the accumulated amount (which includes both contributions and interest) upon retirement or after a specific tenure of service. Early withdrawals may be allowed in certain circumstances, such as for medical emergencies, marriage, education, or the purchase of property. 4. **Types**: **Statutory Provident Fund (SPF)**: This is governed by specific statutes or laws, like the Provident Fund Act, 1925. **Recognized Provident Fund (RPF)**: This type is recognized by the tax authorities, and contributions to it are eligible for tax benefits. **Unrecognized Provident Fund (UPF)**: This type is not recognized by tax authorities, so the benefits associated with it may differ. 5. **Tax Benefits**: Contributions made by both the employee and employer may be eligible for tax deductions. The interest earned and the amount withdrawn after retirement are generally tax-free, subject to certain conditions. 6. **Mandatory or Optional**: In many organizations, especially in the public sector and larger private companies, contributing to a provident fund is mandatory for employees. Smaller organizations may offer it as an optional benefit. The provident fund provides a safety net for employees, ensuring they have some financial support after their working years.