What is EPF
The Employees’ Provident Fund (EPF) is a savings scheme introduced under Employees’ Provident Fund and Miscellaneous Act, 1952. It is administered and managed by the Central Board of Trustees that consists of representatives from three parties, namely, the government, the employers and the employees. The Employees’ Provident Fund Organization (EPFO) assists this board in its activities. EPFO works under the direct jurisdiction of the government and is managed through the Ministry of Labour and Employment.
The EPF scheme basically aims at promoting savings to be used post-retirement by various employees all over the country. Employees’ Provident Fund or EPF is a collection of funds contributed by the employer and his employee regularly on a monthly basis. The employer and employee contribute 12% each of the employee’s salary (basic + dearness allowance) to the EPF. These contributions earn a fixed level of interest set by the EPFO. The amount of interest to be received on the deposit along with the total accumulated amount is totally tax-free, i.e. the employee may withdraw the entire fund without worrying about paying any kind of tax on it.
The accrued amount may also be withdrawn by the nominee or the legal heir of the employee post his death or can be withdrawn by the employee himself post-resignation.
Employees’ Provident Fund (EPF) Schemes
The scheme caters to the needs of more than 5 crore members and is governed by three Acts.
|• Employees’ Provident Fund Scheme, 1952|
|• Employees’ Pension Scheme, 1995|
|• Employees’ Deposit Linked Insurance Scheme, 1976|
- Employees need to become an active member of the scheme in order to avail benefits under this scheme
- Employees of an organization are directly eligible for availing Provident Fund, insurance benefits as well as pension benefits since the day they join the organization.
- Any organization employing a minimum of 20 workers is liable to give EPF benefits to the workers.
- This scheme does not cater to the needs of people residing in Jammu and Kashmir.
Employee’s Contribution towards EPF
The Employees’ Provident Fund is a fund where both the employer as well as the employee contributes a part of the salary. These contributions are made regularly on a monthly basis. The interest rate fixed depends upon the employee’s basic pay along with the dearness allowance in his salary.
In general, the contribution rate for the employee is fixed at 12%. However, the rate is fixed at 10% for the below-mentioned organizations:
- Organizations or firms employing a maximum of 19 workers.
- Industries declared as sick industries by the BIFR
- Organizations suffering annual loss much more as compared to their net value.
- Coir, guar gum, beedi, brick and jute industries.
- Organizations operating under wage limit of ₹ 6,500.
Employer’s Contribution towards EPF
The minimum amount of contribution to be made by the employer is set at a rate of 12% of ₹ 15,000 (although they can voluntarily contribute more). This amount equals to ₹ 1800 per month. It means that both the employer as well as the employee has to contribute ₹ 1800 each per month towards this scheme. Initially, this amount was set at 12% of ₹ 6,500 which would equal to ₹ 780 to be contributed both by the employer and the employee.
Important Points Related to EPF Contributions
|Important Points Related to EPF Contributions|
Interest Rate on EPF
The interest rate for the financial year 2017 – 2018 is 8.55%. The interest rate for the following financial year i.e. 2018-19 is scheduled to be declared in the month of January 2019. The accumulated fund in the PF account attracts certain interest which is 100% tax exempted. The interest earned is directly transferred to the Employees’ Provident Fund account and is calculated depending upon the rate which is pre-decided by the GOI along with the Central Board of Trustees (CBT). The CBT administers the Act. The year in which the new interest rates are announced stays valid for the next financial year i.e. from the year starting on 1st April of one year to the year ending on 31st March of the next year. Let’s understand this with the help of an example:
- The rate of interest i.e. 8.55% is valid and will be applicable only on EPF deposits made between the financial years of April 2017 to March 2018.
- The interest even though calculated on a monthly basis, is transferred to the Employees’ Provident Fund account only on a yearly basis on 31st March of the applicable financial year.
- The transferred interest is summed up with the next month i.e. April’s balance and is then again used for calculation of the interest.
- If the contribution is not made into an EPF account for thirty-six months continuously, the account becomes dormant or inoperative.
- Interest is offered on inoperative accounts of employees who have not attained the retirement age.
- Interest is not provided on the amount deposited in inoperative accounts of retired employees.
- The interest earned on inoperative accounts is taxable as per the member’s slab rate.
- For contributions made towards the Employees’ Pension Scheme by the employer, the employee shall not receive any interest. However, a pension is paid out of this amount after the age of 58.
Calculation of Interest Rate on EPF
The interest rate is announced on a yearly basis, whereas, the interest is calculated on a monthly basis. The interest rate is calculated by dividing the per annum rate by 12. This is done in order to arrive at the amount of interest to be given to the employee for a particular month.
For example :
- If the interest rate per annum is set at 12% then the rate of interest for any particular month in the given year will be calculated as 12/12= 1% per month.
Let’s suppose that an employee started his contributions from the month of November 2017.
- The applicable rate of interest for him will stand at 8.55%.
- In this case, the rate of interest per month will be 8.55/12=0.7125%.
- The employee directs 12% of ₹ 15,000 which is equivalent to ₹ 1,800 per month towards his EPF account.
- This amount is transferred to the employee’s EPF account at the end of every working month and is reflected as a component of the total salary.
- The employer makes a contribution of ₹ 1,800 which is equivalent to the contribution made by the employee.
- 3.67% of the employer’s contribution is made towards EPF account and
- 8.33% of the contribution is made towards the employee’s EPS account
- The employer’s contribution to the employee’s account stands at 3.67% of ₹ 15,000 which is equal to ₹ 550.
- The monthly contributions made by the employer and the employee towards this account amounts to ₹ 1800+ ₹ 550, which is equal to ₹ 2350.
- The balance calculation for the next month (December) will be done in the given manner:
- Balance carried forward from November 2017= ₹ 2,350.
- Interest earned for the month of December 2017 = ₹ 16.75
- Balance at the end of December 2017 = ₹ 2,350 + ₹ 2,350 = ₹ 4,700
Note: Although interest has been earned in December 2017, it is only credited at the end of the financial year on 31st March.
An EPF form is mandatory for all activities that employees wish to undertake in their accounts; the activities include registration, withdrawal, transfer of PF, availing loans from an existing EPF account or for any other reason.
Mentioned below are the various types of forms available :
Forms for EPF Claims
|EPF Form||Use of the EPF Form||Download|
|Form 31||EPF Withdrawal||⇩|
|Form 14||Buying LIC Policy||⇩|
|Form 10D||For claiming monthly pension||⇩|
|Form 10C||For claiming withdrawal benefits/scheme certificate of EPS||⇩|
|Form 11||EPF Account Transfer||⇩|
|Form 19||Final Employees’ Provident Fund Settlement||⇩|
|Form 20||EPF Final settlement in case of death of the employee||⇩|
|Form 2||Declaration and nomination form for EPF & EPS||⇩|
|Form 5 IF||Claim as per EDLI scheme||⇩|
|Form 15G||To save TDS on the interest income on EPF||⇩|
|Form 5||New employees registering for EPF and EPS||⇩|
|Form 11||Auto transfer of EPF||⇩|
Universal Account Number (UAN) is a 12-digit unique number assigned to each and every member who registers with the EPFO. This number is linked with all PF accounts of a member. The member can log in to the EPF member portal using the UAN and access all his PF accounts at one place.
UAN is linked with Aadhaar and PAN of the employee. In case the employee fails to link his Aadhaar and PAN with his UAN, he will not be able to avail almost all the online services offered by the EPF member portal.
EPF member portal allows all members to avail all services online from eKYC to transferring PF. The members have to first register at the EPF member portal and then activate his UAN. Once the password is generated, the member can get their eKYC done and then avail other services online from the comforts of his home anytime. Following services can be availed through the EPF member portal :
|Services Availed at the EPF Member Portal|
|Viewing Service History||Downloading UAN Card|
|Updating Contact Details||e-KYC|
|Modifying Basic Details||e-Nomination|
|Change Account Password||Withdrawal|
|PF Transfer||Track Claim Status|
All contributions made by a member and his employer are mentioned in the EPF passbook. The passbook also contains other important details such as establishment ID and name, member ID and name, office name, employee’s share, employer’s share, EPS contribution, etc.
The member can download the EPF passbook online by visiting the EPF website.
Checking EPF Balance
A member can check the EPF balance accumulated in the account online by following these simple steps:
- Visit EPF’s website at www.epfindia.gov.in
- Go to “For Members” in the “Our Services” section
- Click on the “Member Passbook” option
- Now enter your “UAN”, password and captcha code and login to your EPF account
- Select the “Member ID” to view your passbook
- Your passbook will be displayed with complete details in the document.
The member can also check his EPF balance by sending an SMS to 7738299899 in the format EPFOHO <UAN> ENG.
EPF balance can also be checked through a missed call on the number- 011-22901406.
Read More: How to Check EPF Balance
Lodging EPF Grievances
The EPFO also provides for a grievance system which enables members to register their complaints.
- The members may lodge their complaints by clicking on the ‘Register Grievance’ tab at EPFiGMS.gov.in.
- Members have to fill in all the relevant details pertaining to their account along with the description of the grievance that they have been facing.
- Relevant files related to the grievance being faced can be uploaded on the site.
- The member may also track the status of the grievance by clicking on the ‘View Status’ tab.
EPF on Umang App
Mobile users can avail services provided by the EPF through the Umang app. The portal has five separate sections:
EPF Services on Umang App
Employee Centric Services
|Employee Centric Services|
|EPF General Services|
|Search EPFO Office|
|Know Your Claim Status|
|Account Details on SMS|
|Account Details on Missed Call|
Employer Centric Services
|Employer Centric Services|
|Update Jeevan Pramaan|
Aadhaar seeding can be done directly through the Umang app.
Linking Aadhaar with UAN for EPF
Members have to link their Aadhaar number with UAN for EPF. Aadhaar seeding is mandatory for availing online services. The member has to link his Aadhaar with EPF to process claims online or withdraw funds.
Benefits of the Employees’ Provident Fund (EPF) Scheme
EPF scheme is among one of the largest and biggest saving schemes available to Indian employees. The key benefits of the scheme are mentioned below:
- Tax-Free Savings: EPF Scheme provides certain interest on the deposits at a specific rate which is pre-decided by the organisation. Both the amount of interest received on the deposits and the actual deposited amount is deemed to be tax-free by the Indian Government. Any kind of withdrawal made at maturity or post completion of 5 years of having availed the scheme is 100% tax exempted. However, if the amount is being withdrawn prematurely (within 5 years) it is not free of tax. This feature helps an employee receive special benefits in the form of added income to his savings in the form of interest.
- Long-Term Financial Security: Funds deposited in this account cannot be withdrawn easily and hence, helps in ensuring savings.
- Retirement Period: The accumulated fund under this scheme may be used at the time of retirement of the employee. This provides relief to the retired employee in the form of monetary security.
- Unseen circumstances: The accumulated fund can be used by the employee in case of any kind of emergency. The employee may choose to withdraw his/her fund prematurely. The scheme provides for such pre-term withdrawals in certain special cases.
- Unemployment/Income Loss: In case, where the employee loses his/her current job owing to any reason, then these funds may be used to meet expenses.
- Resignation/Quitting of Job: The employee post-resignation is free to withdraw his/her 75% of the EPF fund after one month of the date of having quit the job and remaining 25% after 2 months of unemployment.
- Death: In case of death of the employee, the collected amount along with the interest is given to the employee’s nominee thus helping the family tide through difficult times.
- Disability of the employee: If the employee is no longer in the position to work then he/she may use these funds to help him/her get over the difficult time.
- Lay-off: In cases of sudden layoffs or retrenchment from the job, this fund may be used by the employee until the time he/she gets another suitable job.
- Long run savings: A safe and full proof saving scheme for individuals wishing to have long run investments.
- Liquidity of funds: This scheme acts as a sound source of income for an individual at the hour of financial crisis. The funds so obtained may be used to meet unavoidable expenses like medication needs or education needs.
- Pension Scheme: The employer not only contributes towards the PF fund but also makes the necessary contributions towards the employee’s pension which can be later used by the employee post-retirement.
- Insurance Scheme: The act also provides for certain provisions whereby, the employer is required to make certain contributions towards an employee’s life insurance where group insurance cover is not present. This scheme ensures that the employees are properly insured.
- Accessible All Over: With the help of the Universal Account Number (UAN), employees can easily get access to their PF account via the EPF member portal. They can transfer their accounts whenever they make a shift in their current jobs.
1. I have withdrawn a part of my EPF corpus. Will I continue getting interest on the withdrawn amount as well?
Ans: No, You will not get interest on the withdrawn amount. However, the amount remaining in the EPF account will continue earning interest.
2. How is UAN assigned?
Ans. When you join a company having more than 20 employees, you become entitled to EPF benefits. EPFO allots a unique 12-digit permanent number known as Universal Account Number (UAN) to the member. All PF accounts of a member are linked with his UAN. In case you want to avail online services through the EPF portal, you have to link your UAN with Aadhaar and PAN.
3. Will I have to activate my UAN for transferring PF online?
Ans. You have to activate UAN by registering at the EPF member portal before you can process claims or withdraw funds online. You can do it easily by visiting the EPF member portal.
4. I have switched my job. Should I get a new UAN?
Ans. No, the UAN allotted to a member remains the same throughout the service period. A new PF account will be opened by the new employer which will be linked to the UAN of the member.
5. I have switched my company. Should I withdraw EPF corpus or transfer my fund?
Ans. It is recommended that you transfer your fund from the old PF account to a new one. If you withdraw the amount before 5 years of service, the withdrawn amount is taxable and should be mentioned under income from other sources while filing ITR.
6. I am currently unemployed and need funds. Can I withdraw my EPF corpus?
Ans. Yes, you can withdraw 75% of your EPF corpus after one month of unemployment. In case you remain unemployed for 2 consecutive months, you can withdraw the remaining 25% of the fund.
7. Is it still mandatory for members to link Aadhaar with EPF to avail online services? If not, is there a way to delink Aadhaar with UAN?
Ans. As per the recent circular released by the EPFO, UIADI has clarified that EPFO can continue to avail Aadhaar based authentication services for EPF schemes. So, in a way, you can not avail your EPF online services in case you delink your Aadhaar with UAN, as for now.
The circular also goes on to say that if a member visits the EPFO office for an offline claim using Aadhaar KYC, the PRO will facilitate Aadhaar seeding facility on the spot in order to make the EPF claim online.
Further, employees with their Aadhaar seeded with the UAN may not be allowed to raise offline claims from now on.
8. Are both the employee’s and employer’s contributions to my EPF account tax-exempt?
Ans. Contributions made to the EPF are tax exempt, however, the tax calculations are different. The employer’s contribution to the EPF account is not considered as part of your taxable income. So the employer’s contribution is tax-exempt at its source.
Whereas, the employee’s contribution is counted as part of his/her taxable income. However, the employee’s contribution is tax deductible under section 80C upto a maximum of Rs. 1.5 lakh per annum. So an employee’s contribution towards the EPF account is eligible to for tax-exemption but only under section 80C.
Also, in case you withdraw your EPF fund before 5 years of contributions, then both employee’s, as well as employer’s share, become taxable.
Latest News :
a) Government notifies 75% EPF withdrawal
The Ministry of Labour notified a key amendment to EPF Scheme on 6th December, allowing employees to withdraw 75% of their EPF balance within 1 month of unemployment. This change had been announced in June 2018, after a meeting of the Central Board of Trustees of the EPFO. Employees do not have to withdraw the balance 25%, but they are allowed to do so after another month (hence, after two months of unemployment).
Under the EPF scheme, 12% of an employee’s monthly salary + dearness allowance is deducted towards EPF. The employer also contributes 12% which is split into 8.67% (towards Employees Pension Scheme or EPS) and 3.3% which goes towards EPF. Employees can also withdraw their EPS amount under the same rules as EPF, but a minimum of 6 months of service is required in order to eligible to do so.
You can withdraw EPF by filling form 19 and EPS through form 10C. However you can withdraw both by filling the composite claim form. You can read the full EPF withdrawal procedure here.
b) EPFO adds nearly 1.2 Crore Subscribers in last 11 months
As per the latest data released by the Ministry of Statistics and Programme Implementation (MOSPI) in its Employment Outlook, EPFO has added nearly 1.2 Crore subscribers from September 2017 to July 2018. During this period, the estimated number of new subscribers of NPS stood at 6.48 Lakhs.
The highest number of subscribers has been added in the age group of 22 to 25 years. This count was 31.37 Lakhs across the country.
More than 29 Lakh subscribers added were in the age group of 18-21 years while 21.87 Lakh members subscribing for EPF were above 35 years of age.
More than 14 lakh members started contributing for EPF again during this period. However, 72 Lakh EPF accounts became inoperative due to non-submission of funds for 36 months continuously.
|Age Group (in years)|
EPF Subscribers Added
|22 to 25||31.37 Lakhs|
|26 to 35||36.55 Lakhs|
|Above 35||21.87 Lakhs|
|Total||1.19 Crores (approx.)|