Welcome to our comprehensive guide on the Employee Provident Fund (EPF)! Whether you’re an employee or an employer in India, understanding EPF is crucial for financial planning and retirement security. In this guide, we’ll break down everything you need to know about EPF in simple terms.
EPF is a retirement savings scheme mandated by the Indian government to provide financial stability to employees after retirement. It’s like a savings account where both employees and employers contribute a portion of the salary every month. These contributions accumulate over time, earning interest and providing a source of income during retirement.
We’ll start by explaining who is eligible for EPF and how it works, including the contribution process and the role of the Universal Account Number (UAN). Then, we’ll delve into the benefits of EPF for both employees and employers, such as tax savings and recruitment incentives.
Next, we’ll explore the various withdrawal options available under EPF, including partial withdrawals for specific purposes like education, marriage, and home purchase. We’ll also cover the process of transferring your EPF account when switching jobs and how to register grievances with the EPFO.
Whether you’re just starting your career or nearing retirement, this guide will empower you to make informed decisions about your EPF account and secure your financial future. Let’s dive in!
What is Provident Fund?
Provident fund is a retirement benefit plan in India for workers and employees. Essentially, a fund manager manages the money in the market using monthly contributions from both employers and employees. After an employee retires, the fund manager pays them a retirement allowance that consists of their principal plus investment income. It is known as a provident fund.
A provident fund is a fund set up by an employer and its workers for those who choose to voluntarily contribute. It provides money to workers in case of split, retirement, disability, passing away, etc. The government oversees provident funds through the implementation of the “Provident Fund Law,” which also protects the rights of employees who hold provident funds.
If you think of a provident fund (retirement allowance fund) as a version of a savings system for retirement allowances, it’s simple to understand.
Between 2 and 15% of employees’ salaries are deposited to the fund management business, while the management company receives deposits from the corporation at a rate equal to or more than that. 100% of the employee’s savings as well as the fund’s investment gains are available for withdrawal at retirement.
Businesses may take out their acquired shares at a fixed rate. Numerous times, the amount of years of labor at the moment of retirement influences the cost of the insurance.
Schemes Offered Under EPFO
Given below are the three schemes that are offered under EPFO:
- Employees’ Provident Funds Scheme 1952 (EPF)
- Employees’ Pension Scheme 1995 (EPS)
- Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)
Objectives of EPFOÂ
The objectives of EPFO (Employees’ Provident Fund Organization) are:
1. Facilitate the maintenance of only one EPF account per employee.
2. Simplify compliance with EPFO rules and regulations.
3. Ensure adherence to EPFO guidelines by organizations.
4. Enhance the reliability and accessibility of online services.
5. Enable easy online access to member accounts.
6. Reduce claim settlement time from 20 to 3 days.
7. Promote voluntary compliance among employers and employees.
UAN and EPFO Portal
The EPFO (Employees’ Provident Fund Organization) offers online access to PF (Provident Fund) accounts for all subscribers, enabling them to conduct various operations like withdrawal and checking their PF balance conveniently.
One significant feature provided by EPFO is the Universal Account Number (UAN), a unique 12-digit number assigned to each member. Unlike member IDs, which change with job changes, the UAN remains constant throughout an employee’s career, making it easier to manage PF accounts across different employers.
The UAN streamlines access to the EPFO member portal, simplifying processes for members. When an employee switches jobs, their new member ID is linked to their existing UAN. However, to utilize online services, employees need to activate their UAN first.
With the UAN, EPFO aims to enhance accessibility and efficiency for PF subscribers, ensuring seamless management of their accounts. This initiative reflects EPFO’s commitment to leveraging technology to simplify processes and provide better services to its members.
Overall, the UAN system facilitates smoother transitions for employees between different employers while ensuring continuity and ease of access to their PF accounts, thereby empowering individuals to manage their financial affairs more effectively.
What are the Benefits of the Provident Fund?
Advantages for Businesses
- Encourages workers to put in extended hours of work
- It is possible to classify corporate contributions as costs.
- Attractive benefits for prospective employees result in the recruitment of quality human resources.
Advantages for Workers
- Tax savings are possible.
- The accumulating funds are safe investments because you cannot take them out once you retire or discontinue the fund.
- According to the number of years of service, corporate deposits are included at the time of retirement as an extra to the financial profit, allowing you to preserve money and earn benefits.
- Having a provident fund is one way for a business to ensure a steady workforce and enhance its welfare system.
- The employee’s monthly income and corporate reserves are used to make savings; the firm’s savings must match or exceed the employee’s reserves. The savings each month sum is two to three times the employee’s wage.
- When they start working for the organization, employees have the option of joining the provident fund or not, but most do so because it often benefits them.
- Regarding the company’s tax advantages, the employer’s portion of the provident fund is recognized as a full deduction.
- Employee tax benefits also exist, and they can be obtained through personal income tax.
- You can get more information on setting up and details of a provident fund by getting in touch with your bank, as they are typically connected to a fund management company.
Types of Provident Fund:-
If you are a worker then you must be eligible for various types of provident funds. It depends on the nature and type of your job/employment. Here we have addressed the usual type of provident funds that are offered in India.
- Public Provident Fund
- Recognized Provident Fund
- Statutory Provident Fund
- Unrecognized Provident Fund
We believe that a lot of people think about receiving welfare assistance in the form of provident funds memberships.
The employer sets a fixed rate for provident funds, and both the employer and the employees contribute to them.
When you retire, you may get benefits based on how you invested your contributions.
Although employees have the option to decline participation, all employees are eligible for the concept.
Generally speaking, the contribution rate is between 3% and 5% of the pay; for businesses with fewer than 300 employees, the percentage is greater at 3%. And rest depends on the company, as each company provides a different percentage to their employees.
If you have more years of service than a specific amount of years, you are also allowed to modify the contributions shown above.
According to risk and reward, provident fund management businesses categorize reserve fund management into multiple forms.
There is another kind that merely pays interest and offers the lowest risk and return.
Less than 300-person organizations frequently opt for minimal risk and low reward.
In particular, 3% of businesses with 20–50 clients that are provident fund members opt for the low-risk/low-return option, and about 80% of the workers are members that are growing.
We hope this helps you if you’re thinking about joining the Provident Fund.
The employer sets a certain rate, both the employer and the employee make payments, and benefits are awarded upon retirement according to how the contributions were used. Academic staff members may opt not to participate.
Every worker and the firm determine a contribution rate. The employee determines how much they want to contribute on their own. Furthermore, it is typical for the employer contribution percentage to be fixed at a fixed rate for every employee, or different rates based on position, etc.
Salary deductions for employee contributions are made to the fund. Furthermore, contributions made by the corporation are recognized as welfare costs. The financial organization in charge of running the provident fund will supervise the contributions, and the amount remaining after investments will be distributed after retirement.
While it is being considered, membership in the Provident Fund would be optional for unlisted businesses in India, much like it is now.
As a result, the company currently has the authority to decide at its discretion what conditions must be met to participate (such as when you can participate after joining the company, payment rates, payment terms, etc.)
Please review the terms and conditions since you will be bound by them when you join Provident Fund.
EPF Eligibility:
Employees from both the Public and Private Sectors are eligible to join the EPF scheme, making it accessible to all workers. Any organization with at least 20 employees is mandated to provide EPF benefits to its workforce.
The eligibility criteria for the Employee Provident Fund (EPF) in India typically include:
1. Employment Type: EPF is applicable to individuals employed in organizations with 20 or more employees. Some organizations with fewer than 20 employees can also opt for EPF coverage voluntarily.
2. Salary Threshold: Employees with a basic salary of up to Rs. 15,000 per month must mandatorily contribute to the EPF. However, employees with a basic salary exceeding this threshold can also contribute voluntarily.
3. Voluntary Enrollment: Individuals earning above the specified threshold can choose to enroll voluntarily in the EPF scheme, subject to certain conditions.
4. Government Employees: EPF is not applicable to government employees. They are covered under a separate provident fund scheme.
5. International Workers: Foreign nationals working in India may be eligible for EPF benefits if their employer is covered under the EPF Act.
6. Contractual Employees: Contractual employees may be eligible for EPF if their contract meets certain criteria laid down by the EPFO.
7. Certain Categories of Workers: Some specific categories of workers, such as certain categories of apprentices and trainees, may or may not be eligible for EPF depending on the regulations and policies in place.
It’s important to note that EPF eligibility criteria may vary slightly depending on the specific regulations and amendments made by the Employees’ Provident Fund Organisation (EPFO) and the Government of India. Therefore, individuals are advised to consult with their employers or the EPFO for precise eligibility details.
EPF Interest:
For the financial year 2023-24, EPF offers a fixed interest rate of 8.15%. Interest earned on PF investments is tax-free but taxed according to the employee’s slab upon withdrawal. Pension contributions do not accrue interest but provide a pension upon reaching 58 years.
Interest Calculation:
EPF interest is computed monthly by dividing the annual interest rate by 12. For instance, with a 8.5% annual rate, the monthly rate is (8.5/12)%. Contributions from both employees and employers determine the total amount, with interest credited at the end of the financial year.
EPF Calculation:
An EPF calculator estimates the corpus in an EPF account at retirement. It considers factors like current age, monthly salary, EPF contribution, and retirement age. With this information, the calculator predicts the EPF balance, incorporating both contributions and accrued interest.
EPF Form
The table below offers a brief idea about the different EPS forms and the purpose they are required for –
| Form | Purpose Of The Form | Application |
| Form 2 | For nominating and declaring | Applicable to both EPF and EPS. |
| Form 5 | For registering | Applicable to new employees registering for EPS and EPF. |
| Form 5 IF | For availing a claim under EDLI scheme | |
| Form 10C | For availing withdrawal benefits or scheme certification. | EPS |
| Form 10D | For availing monthly pension. | |
| Form 11 | For transferring EPF account. | EPF |
| Form 14 | For purchasing LIC policy. | |
| Form 15G | For availing tax-saving benefits on interest. | EPF |
| Form 19 | For settling employees provident fund. | EPF |
| Form 20 | For settling employees provide a fund in case of death. | EPF |
| Form 31 | For EPF withdrawal. | EPF |
How to Transfer EPF Money: Step-by-Step Process:-
Step 1: Ensure you have a Universal Account Number (UAN) linked to your EPF account.
Step 2: Visit the official EPF member portal and complete the registration process if you haven’t already.
Step 3: Log in to the member portal using your credentials.
Step 4: Navigate to the Online Transfer Claim Portal within the member portal.
Step 5: Initiate a transfer request using your login details.
Step 6: Fill in the required details, including information about your previous employment.
Step 7: Verify and authenticate the transfer request with either your old or new employer.
Step 8: Upon submission, you’ll receive a PIN on your registered mobile number for authentication.
Step 9: Track the status of your transfer application using the provided tracking ID.
EPF Withdrawal Rules:
Complete Withdrawal:
1. Retirement: Individuals can withdraw EPF completely upon retirement.
2. Unemployment: If unemployed for more than two months, complete withdrawal is permitted.
3. Job Switching: Complete withdrawal is allowed if changing professions or between jobs, with unemployment exceeding two months.
Partial Withdrawal:
1. Wedding Expenses.
2. Higher Education.
3. Land Purchase or House Construction.
4. Home Loan Repayment.
5. House Renovation.
EPF Taxation:
1. Withdrawals Before 5 Years: Taxed if withdrawn before 5 years of employment. PPF withdrawals are tax-free.
2. Tax Deduction: EPF contributions up to Rs 1.5 lakh/year under Section 80C are tax-deductible for both employer and employee.
3. Interest Taxation: EPF interest is tax-free unless withdrawn within 5 years of account creation. TDS if withdrawal exceeds Rs 50,000 within 5 years.
4. PPF Tax Benefits: PPF investments up to Rs 1.5 lakh/year qualify for tax credit under Section 80C. Interest and maturity amount are tax-free.
Withdrawal Process of EPF:
Offline Withdrawal:
1. Fill the ‘New Composite Claim Form’ or ‘Composite Claim Form’.
2. Submit the form to the EPFO office under your jurisdiction.
3. The form must be attested by your employer.
Online Withdrawal:
1. Ensure you have an active Universal Account Number (UAN).
2. Ensure your mobile number linked to the UAN is active.
3. Link UAN with Aadhaar and provide PAN and bank details with IFSC code.
4. Log in to the UAN online portal.
5. Verify KYC details and follow instructions for withdrawal.
EPFO Grievance Registration Process:
1. Visit https://epfigms.gov.in/ for EPFO grievance registration.
2. Click ‘Register Grievance’ on the top bar.
3. Fill the registration form:
– Select your status (Employer, Employee, EPS Pensioner).
– Provide PF account number and regional EPF office address.
– Enter company name, address, your details (name, address, contact info).
– Specify the grievance type (withdrawal, transfer, pension settlement).
4. Upload grievance letter, complete captcha, and submit.
FAQs:-
1. What is EPF?
EPF stands for Employee Provident Fund, a retirement savings scheme mandated by the Indian government for employees. It is aimed at providing financial security to employees during their retirement.
2. How is EPF different from PPF?
EPF is a retirement benefit scheme managed by the government, wherein both the employer and employee contribute. PPF (Public Provident Fund) is a voluntary savings scheme primarily for individuals, allowing them to invest for long-term savings with tax benefits.
3. What is the eligibility criteria for EPF?
Employees working in organizations with 20 or more employees and earning a basic salary of up to Rs. 15,000 per month are typically eligible for EPF. However, voluntary enrollment is also allowed for those earning above the threshold.
4. How is EPF interest calculated?
EPF interest is calculated monthly based on the annual interest rate divided by 12. Contributions from both employees and employers determine the total amount, with interest credited at the end of the financial year.
5. Can EPF be withdrawn before retirement?
Yes, partial withdrawals are allowed for specific purposes like marriage, education, home purchase, etc. Complete withdrawals are permitted upon retirement, unemployment exceeding two months, or job switching.
6. Is EPF taxable?
EPF withdrawals are tax-free if withdrawn after five years of continuous service. However, withdrawals made before completing five years of service are taxable, except in certain circumstances.
7. How can I transfer my EPF account when switching jobs?
Employees can transfer their EPF account online through the EPFO member portal. It involves initiating a transfer request, filling in necessary details, and authenticating the request with either the old or new employer.
8. What is UAN, and how does it simplify EPF management?
UAN (Universal Account Number) is a unique 12-digit number assigned to each EPF member. It remains constant throughout an employee’s career, making it easier to manage EPF accounts across different employers and simplifying processes like withdrawal and balance checking.
9. How do I register a grievance with EPFO?
To register a grievance with EPFO, visit the EPFO grievance registration portal, fill out the registration form with necessary details including PF account number and grievance type, upload the grievance letter, and submit.
10. What are the benefits of EPF for employers and employees?
EPF benefits both employers and employees by providing tax savings, retirement security, and attracting quality talent for businesses. Employers can also classify EPF contributions as costs, and employees benefit from a secure retirement savings option with tax benefits.
Feel free to reach out if you have any more questions!