Lesser Known EPF Rules and Provisions

As far as most people know, EPF is a fund in which 12% of their salary goes every month, to be equally matched by contributions by their employer to this scheme and EPS (Employee’s Pension Scheme). This is a fund that saves money for you to fall back on during retirement.

Here are some more rules and provisions of the EPF scheme:

  1. Voluntary Provident Fund (VPF)

    This is a little known provision that’s allowed in which members can make voluntary contributions (of more than 12% of their basic salary) towards their EPF. The excess amount you invest in your EPF will continue to gather interest. Your employer’s legal obligation to match your EPF contributions ends at 12% of your basic salary, as there is nothing that says the employer needs to match the total VPF contribution.

  2. EPF can be opted out of, if you don’t yet have a PF account number

    If you’ve never made any contributions towards EPF, ever, you can choose not to contribute towards EPF. If your basic monthly salary is over Rs.15,000, you can opt out of your EPF contributions if you want to (although it isn’t recommended that you do this). This option is only available to those who have never made any EPF contributions (those who are working their first job), and have no PF account number. Persons who opt out of the EPF contributions will get all their salary in hand with no deductions towards provident fund.

  3. EPF issues can be addressed with RTI applications

    The EPF office is not a mismanaged organization. It is a transparent office with set rules and it functions accordingly. For any issues you may face, like not knowing how much balance is available in your EPF account, or where your EPF claim stands, or if no action has so far been taken (beyond the stipulated time mentioned) for your EPF balance transfer or withdrawal – you can file an application under the Right to Information Act. The EPF office will be bound by law to reply to your query within a stipulated timeframe.

  4. Occasions on which EPF withdrawals are allowed

    There are specific occasions during which withdrawals are allowed from the EPF account, with certain conditions that must be met. Bear in mind that only partial withdrawals are allowed on the following occasions when certain conditions are met:

    • Medical treatment:
      • The medical treatment should be sought for the EPF member, spouse, children, or dependent parents.
      • Major surgical operations, or Tuberculosis, leprosy, heart ailments, cancer, mental ailments.
      • Funds can be withdrawn up to 6 times the EPF member’s salary.
      • As evidence, proof of hospitalization (for a period of one month) and the employer’s leave certificate must also be submitted.
    • Repayment of housing loans
      • Housing loans taken in the member’s name, or in the name of the spouse, or taken jointly can be repaid in part using a withdrawal from the EPF account.
      • A minimum of 10 years of employed service must have been completed before this provision can be used.
      • The maximum amount that can be withdrawn is up to 36 times the salary.
    • Construction or Purchase of a new home
      • The plot / site / apartment / house should be purchased and registered under the name of the EPF member, spouse, or be jointly owned by both.
      • This provision can only be made use of once.
      • The maximum amount that can be withdrawn to purchase a site or plot is 24 times the salary.
      • The maximum amount that can be withdrawn is 36 times the salary.
    • Repairs or alterations to an existing home
      • The home should be in the name of the EPF member, spouse, or should be jointly owned by both.
      • For alterations, a minimum of 5 years of employed service (after the house was purchased or built) is mandatory.
      • For repairs, a minimum of 10 years of employed service (after the house was purchased or built) is mandatory.

      • Withdrawals under this provision are allowed only once.
      • The maximum amount that can be withdrawn is up to 12 times of the salary.
    • Marriage or education
      • Withdrawal can be made against this provision for the education or marriage of the EPF member, spouse, siblings, or children.
      • This withdrawal can be made a total of three (3) times.
      • Proof of education or marriage must be submitted in the form of a wedding invitation card, or a copy of fees payable.
      • The maximum amount that can be withdrawn is 50% of the contribution.
  5. With EPF, life insurance cover also applies

    Companies that do not provide any life insurance benefits to their employees through any insurance provider must contribute 0.50% of the every employee’s basic salary towards the Employee’s Deposit Linked Insurance (EDLI) scheme. While the total benefits payable under the scheme are capped at 30 times your basic salary (also capped at Rs.15,000) + a bonus of Rs.1,50,000, it is better than having no insurance cover at all.

  6. Withdrawals are allowed only after 2 months of being unemployed

    You cannot withdraw your EPF account balance as soon as you’re out of work. The EPF office needs proof that at least 2 months have passed since you were last employed, and that you are in need of the funds in your EPF account. When switching jobs, you cannot withdraw your EPF balance, but you can transfer the contributions payable to your new employer, where you and your new employer will continue to contribute to your existing EPF account.

  7. Some of your employer’s contribution gets diverted towards Employee’s Pension Scheme (EPS)

    Along with your EPF contribution every month, a certain percentage (8.33% of Basic Salary, up to Rs.1,250) is contributed by your employer towards EPS.

    • Employee’s Provident Fund (EPF) contribution by Employee: 12%.
    • Employee’s Provident Fund (EPF) contribution by Employer: 12% minus EPS contribution.
    • Employee’s Pension Scheme (EPS) contribution by Employee: none.
    • Employee’s Pension Scheme (EPS) contribution by Employer: 8.33% (subject to a maximum of Rs.1,250).

    So if you’re ever wondering why the employer’s contribution is way lesser than yours in your payslip, this is why.

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