EPF- Employees' Provident Fund Last Updated : 20 Jul 2019

The Employees' Provident Fund (EPF) is a savings scheme that is provided under the Employees’ Provident Fund and Miscellaneous Act, 1952. It enables employees to save funds for their retirement. Both employees and the employer contribute 12% each to the EPF scheme. The interest rate for EPF schemes is 8.65% as of July 2019.
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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. 

EPF Benefits

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)
July 1,800 550.50 4,701 16.94
August 1,800 550.50 7,051.5 50.82
September 1,800 550.50 9,402 67.77
October 1,800 550.50 11,752.5 84.71
November 1,800 550.50 14,103 101.65
December 1,800 550.50 16,453.5 118.59
January 1,800 550.50 18,804 135.54
February 1,800 550.50 21,154.5 152.48
Total EPF balance at the end of the financial year 16200 4954.5 23,505 728.5

Calculations:

  1. Monthly balance = Employer contribution + Employee contribution
  2. 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.

EPF withdrawal

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

FAQ’s 

  1. Can an employer reduce the employer’s share of EPF contribution? 
  2. No, the employers cannot reduce their share of EPF contribution. Such a reduction is considered as a criminal offence. 

  3. How is EPF contribution calculated if the employee is paid on a daily or partly basis? 
  4. The contribution amount is calculated by the salary that is paid in a calendar month. 

  5. Is it possible for the employee to contribute towards EPF after he/she quits the job? 
  6. 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. 

  7. Whom should the employee approach if he/she is not given PF membership? 
  8. 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.  

  9. Is there any age restriction for an employee to become a member of EPF? 
  10. 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. 

  11. Can an apprentice become a member of the EPF? 
  12. 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. 

  13. Can an employer also join the PF? 
  14. No, an employer cannot join the PF. 

  15. Can an employee join EPF directly? 
  16. No, an employee cannot join EPF directly. He/she must work for an organisation that is covered under the EPF & MF Act, 1952

  17. Can an employee opt out of EPF? 
  18. No, an eligible member cannot opt out of EPF. 

  19. How is the PF amount recovered from defaulting members? 
  20. 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. 

News About Employee Provident Fund

  • IL&FS asked to provide PF investment details by NCLAT

    The IL&FS and the government have been asked to provide financial details of pension and Provident Fund (PF) investment in ‘amber’ entities by the National Law Appellate Tribunal (NCLAT). Lakhs of investors have been rescued by courts as they face a chance of losing the entire investment that they have made towards the toxic IL&FS bonds.

    Over 15 lakh employees, who work both in the public and private sector, have invested thousands of crores in IL&FS bonds. The government has classified IL&FS according to their financial position as red, amber, and green, under the resolution plan. Red category is for those entities that will not be able to meet their payment obligation, amber category entities will only be able to meet operational payment commitments to senior secured financial creditors, while green category entities will be able to meet their financial commitments. IL&FS had informed the NCLAT at the hearing on 19 March, that out of the 169 companies, 80, 13, and 50 have been classified as red, amber, and green, respectively. The 13 amber companies have a total debt of Rs.16,373 crore that is currently outstanding.

    2 April 2019

  • Supreme Court says special allowance part of basic salary for PF calculations

    According to the recent ruling by the Supreme Court of India, special allowances will be made a part of basic salary when computing provident fund (PF). This decision will affect the take-home salary in the immediate but will result in a higher retirement fund upon leaving the workforce.

    Currently, employees provide have to contribute 12% of their basic pay to PF and the employer's match that contribution. To increase the take-home salaries of employees, the basic pay is divided under many heads, special allowances being one of them. With the new ruling, the PF amount will be calculated by adding the core basic pay and special allowances. This will increase the monthly PF deductions but will provide a larger retirement corpus. The SC stated that any allowance that is not variable in nature or is a productivity incentive must be treated as a part of the basic pay.

    The move is expected to increase the contribution of EPF and prevent employers from avoiding PF payments. It will benefit private sector employees in the long run by creating a stable financial pool for their retirement years. Employees with a basic salary higher than Rs.15,000 rupees are not legally bound to contribute to PF, they can opt out of it by conveying the same to their employer. However, only few employers offer this flexibility.

    27 March 2019

  • 'Excluded Employee' under Employees Provident Fund scheme, 1952: SC judgement

    According to the latest ruling from the Supreme Court pertaining to the Employees’ Provident Funds Scheme, 1952, employees who have withdrawn their superannuation and employed after retirement on an honorarium basis cannot be treated as 'excluded employee' automatically by the employer. The decision came after Modern Transport Consultation Services Pvt Ltd reached out to the court, stating that their employees who had been hired after retiring from the Indian Railways will be treated as excluded employees and no PF contribution will be made. Following this, the Supreme Court clarified the clause. The court considered the history, scope, and background of the act and found that the 'excluded employees' clause specifically referred to the Employees’ Provident Funds Scheme, 1952.

    Even though the employees hired by Modern Transport were government employees and withdrew their superannuation, they had been covered under a different retirement act not the EPF scheme of 1952. The court ruled that PF contribution exclusions can be made for establishment under Section 5 of the act if benefits provided by the company are better than the PF scheme. The court further stated that only those employees who were members of the fund set up under the PF scheme of 1952 and had withdrawn the full amount of their accumulations in the fund during retirement were to be treated as 'excluded employees'.

    27 March 2019

  • Supreme court rules verdict regarding Employees' Provident Fund

    The Supreme Court recently ruled a verdict regarding Employees' provident Fund. According to the verdict, companies are now not allowed to exempt special allowances from the basic salaries of the employees. The ruling has made it mandatory for employers to include special allowances when making deductions for Provident Fund.

    Special allowances include convenience allowance, education allowance, canteen allowance, medical allowance, etc. The judgement will not affect anyone drawing a basic salary of or under Rs.15,000. However, the verdict will increase the financial burden on companies as they will now have to pay the basic salary, PF and. special allowances separately.

    The new Employees' Provident Fund rules mandates both employers and employees to contribute 12 per cent of basic wages towards the fund. After the new ruling, strict action will be taken by the Employees' Provident Organisation (EPFO) if the employer fails to include special allowances while computing the provident fund contribution.

    18 March 2019

  • Employees Will Not be Required to Transfer EPF when They Change Jobs

    Subscribers to the Employees’ Provident Fund 9EPF) will no longer be required to transfer the funds in their old EPF account when they change jobs. Despite having the UAN to link PF accounts, EPF subscribers are still required to file a transfer claim when they switch jobs.

    The Employees Provident Fund Organization (EPFO) is currently testing if the EPF transfer can be automated when an individual changes their job. The EPFO aims to launch the facility sometime in the following year. Currently, the UAN is merely a reference for new employers to contribute to their employee’s EPF. The new EPF account does not reflect the contributions made by the subscriber’s previous employer. While the automation planned by the EPFO, the UAN will function similar to a bank account with the total PF contribution made by all the subscriber’s employers.

    11 March 2019

  • Supreme Court rules PF deductions to include special allowances which are included in basic salary

    The Supreme Court ruled that ‘basic wage’ should also include special allowances that are paid to employees as part of the total salary package. The Employees’ Provident Fund (EPF) contribution will be deducted not on the basic salary alone but on the total amount that includes the allowances too. It will be deducted under Section 6 of the Act. The Employees’ Provident Fund provides financial security as a retirement benefit scheme. It is applicable to employees in various establishments as well as factories. Employees who earn up to Rs.15,000 per month contribute 12% of the dearness allowance and basic salary. This is not mandatory for others. The employer contribution is also 12% and is mandatory for all employees. The employer’s component of 12% is split into 8.33% for the Employees’ Pension Scheme and 3.67% for the Employees’ Provident Fund (EPF). The rate of interest on PF deposits was raised by the Employees’ Provident Fund Organisation (EPFO) to 8.65% from the 8.55% for its subscribers who are approximately 6 crore in number. This is for the fiscal year 2018-2019.

    5 March 2019

  • PF ruling might not cover individuals who are earning more than Rs.15,000 per month

    Individuals with a basic salary and special allowances of over Rs.15,000 might not be impacted by the Supreme Court order on contributions made by employees and employers towards Provident Fund (PF). As per sources, the ruling is applicable for individuals who are earning Rs.15,000 or lesser in basic pay and special allowances and contributing towards PF is not compulsory for those who earn above Rs.15,000.

    Central Provident Fund Commissioner (CPFC) K K Jalan said that the ruling was made as plenty of employers had not been deducting PF above the required minimum wage. The order might reduce the salary of a few employees, but it is not expected to be high. Several employees do not want to pay a higher contribution towards PF as it would reduce their monthly salary. Jalan further added that there is always a predicament when such decisions are made.

    1 March 2019

  • EPF interest rates hiked to 8.65%

    The Employees' Provident Fund Organisation (EPFO) recently announced an interest rate hike. According to the new instructions, the rates have been hiked to 8.65% for all the 60 million EPF subscribers for the year 2018-2019. The previous rate of interest for the year 2017-2018 was 8.55%. It is a ten-point hike from the preceding interest rate.

    With a subscriber base of 60 million, EPFO manages retirement funds of over Rs.11 lakh crore. The 8.55% interest rate in the previous financial year was the lowest rate in 5 years.

    The EPFO falls under the authority of the union labour ministry. After a meeting with the Central Board of Trustees (CBT) of EPFO, labour minister Santosh Kumar Gangwar stated that this rate hike shows that the ministry has been working for the working class. The CBT consists of representatives from the government, employers, and trade unions and is headed by the labour minister.

    26 February 2019

  • Should Voluntary Provident Fund Contribution be Increased?

    The interest rate of the Indian has been gradually decreasing since the last few years. In spite of that, the Central Board of Trustees which is the governing body of Employees’ Provident Fund Organisation (EPFO) has planned to hike the EPFO interest rate to 8.65%. This hiked rate of interest will be extended to more than six crore members on the EPFO portal on their EPF deposit for the financial year 2019. The rate of interest for the previous financial year stood at 8.55%.

    This decision has not been confirmed yet, as the Finance Ministry is yet to approve this hike. However, most employees in India are hopeful for the Indian Government to approve this interest rate, for this is the election year. It is a well-known fact that the income one earns on their EPF deposit is absolutely tax-free and one also gets a tax deduction under Section 80C of the Income Tax Act, 1961, for their EPF contribution. 12% of an individual’s basic salary along with DA is deducted and contributed towards EPF. The employer of the organisation also makes a similar contribution. Over and above this contribution, employees working in organisations can choose to contribute an additional amount, which is known as the Voluntary Provident Fund or VPF.

    Financial analysts and experts have mentioned that since the EPF interest rate of 8.65% is nearly 1% higher than the rest of the tax-saving instruments, employees should look to invest more in VPF as compared to other financial products.

    26 February 2019

  • Budget 2019: EPFO limit raised from Rs.2.5 lakh to Rs.6 lakh

    According to the 2019 interim budget, the Employee Provident Fund (EPF) limit in the case of death of an employee has been raised from Rs.2.5 lakh to Rs.6 lakh. This major step has been taken to give financial support to the family of the deceased.

    During the budget presentation, Railway Minister Piyush Goyal stated that the raise will ensure safety to families of the salaried individuals in the case of premature death. The move is applicable to both government employees and private sector employees. The government also increased the gratuity from Rs10 lakh to Rs.30 lakh.

    5 February 2019

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