What is EPF?
Under the Employees’ Provident Funds and Miscellaneous Act, 1952, the Employees’ Provident Fund (EPF) acts as the main scheme. The Employees’ Provident Fund Organisation (EPFO) handles all the operations of the EPF scheme. The active implementations of the scheme are supervised by the Ministry of Labour and Employment.
The employee and employer each contribute 12% of the employee’s basic salary and dearness allowance towards EPF. For the Financial Year 2018-2019, the rate of interest on EPF deposits is 8.65% p.a.
Eligibility Criteria and Exemption Details to join the EPF for Employees
The eligibility criteria required to join the EPF for employees are as follows:
- If you are a salaried employee with an income below Rs.15,000, then you must register yourself for an EPF account.
- Any organisation with 20 or more employees has to mandatorily enrol for the EPF scheme. An organisation with less than 20 employees can register for the scheme on their own.
- If your salary exceeds Rs.15,000 every month and if you are categorised as a non-eligible employee, then it is not compulsory for you to enrol for the EPF scheme. However, you can still enrol for it if you want by getting an approval from your employer and from the Assistant PF Commissioner.
Eligibility Criteria and Exemption Details to join the EPF for Employers
As an employer, you need to keep the following points in mind with regard to joining the EPF scheme:
- If you are an employer, you have the choice to not join the EPF scheme if you have lesser than 20 employees in your firm or organisation.
- You are also exempt from enrolling for the scheme if a major part of your company’s employees is of the opinion that they do not want to be under the scheme. However, for this, you may have to go through many formalities and moreover, there are certain conditions that are applicable to this particular exemption.
- If an employee or a group of employees is availing benefits from the Provident Fund that match or exceed certain statutory provisions, then the employer can choose to be exempted by filling Form 1.
Given below are the benefits of the EPF scheme:
- It helps in saving money for the long run.
- There is no requirement to make a single, lump-sum investment. Deductions are made on a monthly basis from the employee’s salary and it helps in saving a huge amount of money over a long period.
- It can help an employee financially during an emergency.
- It helps in saving money at the time of retirement and helps an individual maintain a good lifestyle.
Contributions towards EPF
It is mandatory for the employee and the employer to make a contribution towards EPF. Each makes a 12% contribution of the employees’ dearness allowance and basic salary towards EPF. Given below are the details of the employees’ and employers’ contribution towards EPF.
- Employee’s contribution towards EPF: 12% of the employee’s salary is deducted by the employer on a monthly basis for contribution towards EPF. The entire contribution goes towards the EPF account.
- Employer’s contribution towards EPF: The employer also contributes 12% of the employee’s salary towards EPF. However, the employer’s contribution is divided into the below mentioned categories:
|Category||Percentage of contribution (%)|
|Employees Provident Fund||3.67|
|Employees’ Pension Scheme (EPS)||8.33|
|Employee’s Deposit Link Insurance Scheme (EDLIS)||0.50|
|EPF Admin Charges||1.10|
|EDLIS Admin Charges||0.01|
Example for calculation of EPF
Given below is the example of how the calculation of EPF works:
Let’s assume an employee has joined an organisation with a salary of Rs.15,000.
|Month||Employee’s Contribution (12%) in Rs.||Employer’s Contribution (3.67%) in Rs.||Balance at the end of the month||Rate of interest that is applicable (8.65% p.a.)|
|June||1,800||550.50||2,350.5||Nil (new employee)|
|Total EPF balance at the end of the financial year||16200||4954.5||23,505||728.5|
- Monthly balance = Employer contribution + Employee contribution
- Interest amount = (Rate of interest x Monthly balance)/ (12 x 100)
Enrollment for the EPF scheme in India
The employers handle the entire process for the employees’ registration towards EPF. However, if employers wish to enrol under the EPF scheme, there is an eligibility criterion that must be met, and a list of documents must be submitted.
Companies that are involved in the activities that are present in Schedule 1 of the EPF Act are eligible under the EPF scheme. The minimum number of employees that must be present under the organisation is 20.
Eligible organisations must submit the below-mentioned documents in order to register towards the EPF scheme:
- In case the organisation is a partnership firm, the partnership deed must be submitted.
- The registration certificate of the society along with a copy of the objectives and rules must be submitted for the registration of the society for the EPF scheme.
- Certificate of Corporation must be submitted for public and private limited companies. A copy of the Memorandum and Articles of Association must also be submitted.
- All companies must submit a copy of the balance sheet, employees’ salary details, first sales invoice, partition deed, PAN details, and income tax documents.
The EPF money deposited into the account grows over a period of time. Employees can withdraw their PF amount either partially or completely. PF amount can be withdrawn completely under the following circumstances:
- In case individuals remain unemployed for a duration of 2 months or more. However, it must be certified from a gazetted officer that the individual has remained unemployed for more than 2 months.
- In case the individual retires from working.
In case individuals try to withdraw the PF amount while shifting from one job to another without staying unemployed for more than 2 months, it is illegal and against the PF regulations and rules. Partial withdrawal can be in case of marriage, education, purchase of land or house, construction of a house, repaying of home loan, renovation of a house, and just before retirement. However, the employee must complete a certain number of years of service for partial withdrawal to be made.
Given below are some of the reasons why EPF should not be withdrawn before 5 years of service:
- Section 80C benefits cannot be availed: In case individuals have been claiming benefits under Section 80C of the Income Tax Act and withdraw their PF amount completely, the interest that has been earned on the employee’s contribution must be taxed.
- The amount will be taxed: In case any withdrawal of PF is done within 5 years of service, the amount that is withdrawn is added to the taxable income. In case the amount that is withdrawn is more than Rs.50,000 and the withdrawal is done within 5 years, there is a 10% tax cut on the amount. However, on submitting Form 15G and 15H with the Income Tax (IT), individuals are exempted from paying this amount.
The withdrawal of PF amount can be done online. However, employees must activate their Universal Account Number (UAN) and link their Know Your Customer (KYC) details in order to withdraw their PF online.
Method to check the EPF claim status
Withdrawal of the EPF amount can be done easily in case of any urgent requirements or to receive funds after retirement. In case employees want to check the status of the claim, the procedure mentioned below must be followed:
- Employees must visit the EPFO portal (https://www.epfindia.gov.in/site_en/index.php).
- Next, the individual must click on ‘For Employees’ under the ‘Our Services’ tab.
- Next, the individual must click on ‘Know Your Claim Status’.
- In the next page, the UAN and captcha details must be entered.
- In the next page, enter all the details such as the state, the EPF office, the establishment code, and the PF account number.
- After filling the details, click on ‘Submit’. The PF claim status will be sent to the individual’s registered mobile number by SMS.
Procedure to withdraw funds from an EPF account that has been unclaimed
Withdrawal of the EPF amount from an unclaimed account is a very simple process. The procedure to withdraw funds from an unclaimed EPF account is mentioned below:
- The first step would be to visit the EPFO website and fill the required EPF claims form.
- The form must be submitted at the post office.
- The individual will receive the PF amount within 3-20 days.
Different types of EPF Forms
The table below gives the list of different EPF forms and their uses:
|Type of Form||Use of the form|
|Form 31||It is also known as the PF Advance Form. It can be used for obtaining withdrawals, loans, and advances from the EPF account.|
|Form 10D||This form is used for availing a monthly pension.|
|Form 10C||This form is used to claim benefits under the EPF scheme. Form 10C is used to withdraw the funds that the employer contributes towards EPS.|
|Form 13||This form is used to transfer your PF amount from the previous job to your current one. This helps in keeping all the PF money under one account.|
|Form 19||This form is used to claim the final settlement of the EPF account.|
|Form 20||Family members can use this form to withdraw the PF amount in case the account holder passes away.|
|Form 51F||This form can be used by a nominee in order to claim the benefits of the Employees’ Deposit Linked Insurance|
- Can an employer reduce the employer’s share of EPF contribution?
- How is EPF contribution calculated if the employee is paid on a daily or partly basis?
- Is it possible for the employee to contribute towards EPF after he/she quits the job?
- Whom should the employee approach if he/she is not given PF membership?
- Is there any age restriction for an employee to become a member of EPF?
- Can an apprentice become a member of the EPF?
- Can an employer also join the PF?
- Can an employee join EPF directly?
- Can an employee opt out of EPF?
- How is the PF amount recovered from defaulting members?
No, the employers cannot reduce their share of EPF contribution. Such a reduction is considered as a criminal offence.
The contribution amount is calculated by the salary that is paid in a calendar month.
No, it is not possible for an employee to contribute towards EPF if he/she has left the service. The employee’s and employer’s contribution must match.
The employee must approach the employer first. If not provided by the employer, he/she can approach the Regional Provident Fund Commissioner of the PF office.
No, there is no age restriction for an employee to become a member of the Provident Fund. However, if the employee has already crossed the age of 58 years, he/she cannot become a member of the Pension Fund.
No, an apprentice cannot become a member of the EPF, but he/she must enroll for EPF as soon as they stop being an apprentice.
No, an employer cannot join the PF.
No, an employee cannot join EPF directly. He/she must work for an organisation that is covered under the EPF & MF Act, 1952.
No, an eligible member cannot opt out of EPF.
Prosecution under Section 14 of the EPF & MP Act, 1952, realisation of dues from debtors, attachments of bank accounts, attachment and sale of properties, and detention and arrest of the employer are some of the ways the PF amount is recovered from employers.
EPF Other Pages
- EPF Form 5
- Employee Provident Fund Scheme 1952
- EPF Form 11
- PF Limit
- PF Nomination Form
- PF Statement
- Form 2
- EPF Name Correction
- PF Account Number
- PF Withdrawal Forms
- SBI EPF Account
- EPF Account Withdrawal Fraud
- EPF Money after Resignation
- EPF Life Insurance
- 7 Ways to Check PF Account Balance
- EPFO into Equities