The Employees’ Provident Fund Organisation (EPFO) is a non-constitutional body that promotes employees to save funds for retirement. The organisation is governed by the Ministry of Labour and Employment, Government of India and was launched in 1951.
In terms of the number of financial transactions and clientele, the EPFO is one of the largest Social Security Organisations in the world.
The schemes offered by the organisation cover Indian workers and international workers (from countries with whom the EPFO has signed bilateral agreements).
Schemes Offered Under the EPFO
Given below are the various schemes that are present under the EPFO:
- Employees’ Provident Funds Scheme 1952 (EPF)
- Employees’ Pension Scheme 1995 (EPS)
- Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)
The schemes are explained below:
1. Employees Provident Fund (EPF) Scheme 1952
This scheme provides an accumulation of funds that can be used by members after their retirement or can be used by their families in case they pass away.
2. Employees’ Pension Scheme (EPS) 1995
This scheme provides pension is provided on a monthly basis after the member retires, faces a disability, or the pension will be given to the widow or children in case the member passes away.
3. Employees Deposit Linked Scheme (EDLI) 1976
Under this scheme, in case an employee who is a member of the EPFO passes away during employment, benefits will be provided. Benefits of up to 30 times the salary of the employee up to a maximum of Rs.6 lakh will be provided.
Vision of EPFO
One of the aims of the EPFO is to become one of the best Social Security Organisations in the world by meeting the requirements of its stakeholders and by providing futuristic services. Given below are the aims of EPFO Vision 2030:
- Universal Social Security Coverage in the form of Life Insurance, Pension, and Provident Fund is provided to all workers in India on a compulsory basis.
- New policies that provide a benefit structure with social security support at a reasonable level must be initiated.
- All EPFO benefits must be easily accessible online with State-of-the-Art technology.
Objectives of EPFO
Given below are the main objectives of the EPFO:
- To ensure every employee has only one EPF account.
- Compliance must be facilitated easily.
- Make sure organisations follow all the rules and regulations set up by the EPFO on a regular basis.
- To ensure that online services are reliable and to make improvements in their facilities.
- For all member accounts to be accessed online easily.
- Claim settlements to be reduced from 20 days to 3 days.
- Promotion and encouragement of voluntary compliance.
Functions of EPFO
The main functions of the EPFO are mentioned below:
- Helping the Central Board of Trustees in operation of the Insurance Scheme, Pension Scheme, and Provident Fund Scheme for all the registered establishments in the country.
- To ensure the Act is enforced in every state in India except for Jammu and Kashmir.
- Individual accounts must be maintained by the EPFO.
- Settlement of claims is handled by the EPFO.
Services offered by the EPFO
Some of the services offered by the EPFO are mentioned below:
1. Universal Account Number
A Universal Account Number (UAN) is given to every employee who is contributing towards EPF. Various Member IDs that have been allotted to employees from various organisations come under the UAN. Each employee will be allotted only one UAN throughout his/her employment life. The EPFO allots the distinctive 12-digit UAN to employees. A monthly SMS regarding the contribution of the EPF amount, transferring of EPF amount from the previous Member ID to the current one, checking and downloading EPF Passbook, withdrawal of EPF online, and updating KYC details online are some of the services that are provided by the UAN.
However, employees must activate their UAN in order to avail the services online. Once the UAN is activated, employees can use their UAN and password to login on the EPFO portal and avail these services.
2. Helpdesk for Inoperative Accounts
In February 2015, the EPFO set up the Inoperative Accounts Online Helpdesk to help employees track dormant and old inoperative accounts that do not accumulate any interest. Employees can track these accounts, and either withdraw the funds or transfer them to the current Member ID. Basic details must be provided by the employees about their previous employment to track inoperative accounts.
3. Online withdrawal of EPF
The EPF withdrawal amount can be easily done online with the help of the UAN. Employees who have been unemployed for more than 2 months are eligible to withdraw their EPF amount. However, the Aadhaar and bank details of the employee must be linked with the UAN.
4. International workers can generate a Certificate of Coverage
EPF members that are working in countries who have Social Security Agreements with India can generate a Certificate of Coverage (CoC) with the help of an online centralised software that the EPFO has launched.
5. Monthly returns for exempted establishments
With the help of the IT tool that the EPFO has launched, exempted establishments can file their monthly returns online without any trouble.
6. UMANG App
The EPFO has launched the Unified Mobile Application for New-age Governance (UMANG) for EPF members. Employees can use their UAN and password to avail the services of the UMANG app. Various services such as viewing of EPF passbook, updating profile details, etc. are available on the UMANG app.
7. Online transfer of EPF
EPF Transfer amount from the employee’s previous Member ID to the current one can be done online with the help of the UAN. The process is hassle-free, paperless, and simple.
8. Establishments can register online
The Online Registration of Establishments (OLRE) can be completed on the EPFO portal. Employees are also benefitting due to the online presence of the PF code allotment letter.
9. Online payments of PF
It is compulsory for all organisations to make the PF payments online. Currently, Kotak Mahindra Bank, Axis Bank, ICICI Bank, HDFC Bank, Bank of Baroda, Union Bank of India, Allahabad Bank, Indian Bank, Punjab National Bank (PNB), and State Bank of India (SBI) are the 10 banks that have agreements with the EPFO for the collection of dues.
10. Missed call and SMS service
Members who have activated their UAN can access their PF balance, previous contribution, the status of KYC, etc., by sending an SMS (Format: EPFOHO UAN) to 7738299899 or by giving a missed call to 011-22901406. Employers will also receive an SMS for non-payment of EPF.
11. Claim status and passboo
The EPFO members will be able to check the status of their claims as well as view and download their EPF passbook with the help of the UAN.
In case of any issues regarding the settlement of pension, transfer of PF, withdrawal of PF, etc., members can raise a complaint online. Grievance redressals are a top priority for the EPFO, and they are dealt with swiftly. 80% of the complaints are solved within 7 days and 97% of them are solved within 15 days. Due to constant monitoring of the EPF grievances, complaints have come down from 20,000 to 2,000-3,000 in a day.
EPFO Stock Market Investment
EPFO makes investments of the pension fund in the share market. The share market provides the best returns in the long run. 15% of the corpus of the pension fund is invested in the stock while the remaining is still invested in debt securities.
1. Only 5% Corpus in the Stock Market
The EPFO is treading in the stock market very cautiously. It took 10 years to take a decision in this regard. The government has given permission to invest 15% of the corpus in the stock market, but EPFO board is going with only 5%. The remaining 95% corpus still invested in debt securities.
2. The Equity Investment can Increase up to 15%
This financial year, the EPFO is committing only 5% of its incremental corpus to the stock market. But further it can increase the stock market investment up to 15%. The increase in equity investment would depend upon the experience of EPFO. The EPFO is going into the stock market step by step.
3. Only New Contribution Goes into the Stock Market
EPFO has 8.5 lakh crore in its kitty. But this whole corpus is not the part of EPF investment in the stock market. Rather, EPFO is not touching the existing corpus. The EPFO investment in the stock market is only from the incremental corpus. It means the money accumulated in the current financial year would be considered for stock investment. In a financial year, EPFO gets about 1-1.2 lakh crore. The 5% of this amount would be about 5000-6000 crore. Only this amount would be invested in the share market. The existing 8.5 lakh crore will remain in debt securities.
4. Equity Investment through the ETF
The EPFO is not picking valuable stocks itself for the retirement fund corpus. Rather, It is relying on the broader market. The investment of EPFO in the stock market would be through the Sensex and Nifty ETF.
Exchange traded funds (ETF) are a type of mutual fund which invests in index stocks. It follows the weightage of stocks in an index. Consequently, the exchange traded fund follows the movement of its benchmark index. The result of an ETF is similar to the indices e. g. Sensex, Nifty, Midcap index.
The EPFO also invest in CPSE (central public sector enterprise) ETFs as and when new fund offers (NFOs) comes in the market. However the government has clarified that it will not invest in the gold ETF.
5. Prominence to Nifty
The EPFO is relying more on the broader index Nifty. The 75% of earmarked fund goes to the SBI Nifty ETF, while only 25% is allocated for the SBI Sensex ETF. Nifty is 50 stock index, whereas Sensex is a 30 stock index. However, the investment ratio may alter in future.
6. The Return from the EPF Should Increase
The investment in equity markets has the potential to give the best return in the long term. The Nifty has given 15.6% annualized return since its inception in 1996. If EPFO gets similar return from the Sensex and Nifty ETF, the overall return of EPFO corpus would be higher.
Due to the better return, the EPFO would be able to give better rate on EPF. Currently it is 8.75%. However, you can’t expect a considerable increase as an investment in the equity market is a mere 5%. If we take average return 15%, the EPFO would be able to give a return of 9.06% instead of 8.75%. However, in the short term, it all depends upon market movement.
7. The Government has Given Permission
The finance ministry has given its permission to invest in the stock market earlier in the year. In the April 2015 the government has released the notification. In this notification government has given an investment pattern for investment of EPFO corpus.
- 45-50%- Government securities
- 35-45% Debt securities and term deposits of banks
- 5-15% equity market.
- Up to 5% Money market
- Up to 5% Asset backed securities
The labour unions and labour ministry were reluctant for equity investment. But finance ministry was insisting. The greater return of National Pension Scheme also made the background for equity investment by the EPF. The retirement scheme NPS invests some percentage in the share market.
8. SBI Mutual Fund Manages the Fund
The EPFO has selected the SBI mutual fund as the fund manager to invest in the stock market. Indeed the EPFO is investing in the ETFs of SBI mutual fund. These ETFs are the SBI Nifty ETF and SBI Sensex ETF. The EPFO chose SBI to manage its corpus because it is charging mere 5 paise for investment of Rs 100. It means EPFO is spending Rs 2.5 Crore as the charges of fund management.
9. It Gives Stability to Stock Market
The investment of EPFO in the stock market helps the equity market. It gives greater stability to the share market. It adds liquidity to the share market. It also reduces dependency on FIIs.
Similar to LIC the EPF corpus would also counter balance the selling of the FII. The FIIs act according to the global markets. But domestic investor, takes decision on domestic market condition. Therefore, the domestic investors turn net buyers at the time of FII selling. This behavior helps to stabilize the share market.
Along with LIC, and domestic mutual fund companies, the EPFO can counterbalance the FII investment.
10. The EPFO Equity Investment Is Smaller Than LIC
Considering the size of EPFO corpus the investment in share market is minuscule. The 5000 crore of EPFO would be far less than 60000-7000 crore of LIC. LIC, also the government entity invests a considerable amount in the stock market. It is a major shareholder of many blue-chip companies.
The interest rates are on the slide. In this circumstance, the equity investment can only give you higher returns.
- Is the Provident Fund Scheme, Pension Scheme and an Insurance Scheme introduced by Employee Provident Fund Organization (EPFO) mandatory?
- Does this cover international workers as well?
- What is the prevailing interest rate on Provident Fund accumulations?
- What is UAN? How is it connected to the EPF programme?
- What is the minimum number of employees required in an establishment for it to come under the purview of this Act?
- What are the e-governance initiatives undertaken by EPFO?
- What is “Superannuation” pension?
- When is an employee entitled to an early pension as per the Employees’ Pension Scheme?
- What is the procedure of withdrawing PF account money and Pension Fund money through the UAN portal once the employee has left a job and joined a new organization?
- What is the UAN Helpdesk Contact Details?
- How much of an employee’s wage is considered for making a PF contribution?
- Is there a tax benefit on the schemes offered by Employee Provident Fund Organization (EPFO)?
- What is the mode through which Employers should pay the PF due?
- How are Electronic Challan cum Return (ECR) documents generated?
- What is the E-Return Tool? How to use the E-Return Tool?
- What is a digital signature certificate (DSC)? How is it relevant in procedures undertaken by EPFO?
- Why should an employer register his/her establishment on the EPFO employer portal?
- How to purchase a Digital Signature Certificate?
- Who is the Certifying Authority?
Yes, the Provident Fund Scheme, Pension Scheme and an Insurance Scheme introduced by Employee Provident Fund Organization (EPFO) is mandatory, especially for employees who fall under the wage ceiling set by the organization.
Yes. The schemes cover Indian workers as well as International workers in countries where a bilateral agreement has been signed with the Indian Government. There are 14 Social Security Agreements made with India by countries such as Germany, Belgium, Switzerland, France, Grand Duchy of Luxembourg, Denmark, Netherlands, Republic of Korea, Finland, Hungary, Sweden, Norway, Czech Republic, Canada and Austria. International workers can also use the EPFO portal for online application of COC (Certificate of Coverage).
The current rate of interest applicable on Provident Fund accumulations is 8.75%.
UAN or Universal Account Number is a 12-digit number that will be allotted to each member who contributes to the EPF Scheme and this will be generated by EPFO for each PF member. For example, the UAN number will be 123456789121. This UAN will cover the Member IDs that are allotted to an individual when they are employed by various establishments. Thus the Universal Account Number links multiple Member Identification Numbers that are assigned to a single member. With this facility, a member can view the details related to all their Member Identification Numbers once they have their UAN number and have registered for this. The UAN will remain the same throughout the course of an employee’s career.
The minimum number of employees required in an establishment for it to come under the purview of this Act, is not less than 19 employees.
The e-governance initiatives undertaken by EPFO are Online Transfer Claim Portal (OTCP), Online Registration of Establishment (OLRE), and Online Monthly Return for Exemption Establishment, etc.
An employee is entitled to superannuation pension if he/she has provided a service for a period of 10 years or above and has retired at the age of 58 years.
As per the Employees’ Pension Scheme, an employee entitled to an early pension when he/she has provided a service for a period of 10 years or above and then ceases to be in employment or retires before attaining the age of 58 years.
When the employee leaves a job and joins a new organization, he/she should get the funds transferred to the new account under the present employer. The UAN facility permits portability of funds from one account to another since it links an employee’s Member IDs. This will be done only after the KYC information has been verified by both the establishments.
You can contact the UAN Helpdesk regarding any queries related to the UAN member portal at the following number: 1800 118 00 or through email at firstname.lastname@example.org.
The remuneration paid to an employee is cash is considered while calculating the monthly PF contribution. This will exclude wage categories such as Overtime allowance, House Rent Allowance (HRA), Commission or any such incentives, bonus, presents given to the employee by the employer, etc.
Tax is not applicable on the EPF earned by an employee. The contribution made by the employer is not taxed and a contribution of the employee for an amount of up to Rs. 1 Lakh is deducted from taxable income under Section 80(C) of the Income Tax Act. The interest (as per the rate set by the EPFO) accrued on the same is also not taxable. This is applicable only in terms of the Government’s EPF scheme.
Employers must pay the PF due through Electronic Challan cum Return (ECR).
The E-return tool is used by EPFO to generate the Electronic Challan cum Return (ECR) documents.
The Employees Provident Fund Organization (EPFO) offers the E-Return Tool to employers for ease of payment of PF on behalf of their employees. This tool can be downloaded and all monthly payments can be paid electronically using. In the main menu you can select "Generate returns for submission to EPFO" to generate the Electronic Challan cum Return (ECR) and upload it online in the employer’s e-Sewa.
Digital signature certificate (DSC) is an electronic form of hardcopies of certificates such as passport, driving license, etc. These act as identity proof for individuals who are applying for certain services online or for signing documents digitally. With the enactment of the Information Technology Act, 2000, Digital Signature Certificates have become legally valid in India. EPFO stipulates that its users must use Digital Signature Certificates in order to attest their online claims and also to verify their identity and other details submitted online. When this is digitally attested and submitted there is no need to submit any physical documentation to the EPFO office.
An employer has to register his/her establishment on the EPFO employer portal because all PF contributions and other related activities can only be performed online through this portal. The Electronic Challan cum Return has to be uploaded in this portal in the prescribed proforma and the receipt will be populated accordingly. Many other services can also be availed through the EPFO employer portal by registering for the same.
In order to purchase a Digital Signature Certificate that is legally valid, you can approach the Govt. of India, Certifying Authorities (CA) (such as NIC, e-Mudhra, TCS, n-code, MTNL, etc.) and Controller of Certifying Authorities (CCA) that issue these certificates.
Certifying Authority is a recognized agency that issues, renews and revokes Digital Signature Certificate. The Information Technology Act 2000 authorizes Certifying Authorities to issue Digital Signature Certificate. Some of the Certifying Authorities (CA) in India are NIC, e-Mudhra, TCS, n-code, MTNL, etc.
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