What is EPF?
You may know it as that annoying, elusive chunk of your monthly salary that you aren’t able to spend. So what is it, and where does it go?
Employee’s Provident Fund (EPF) is a retirement benefit scheme that’s available to all salaried employees. This fund is maintained and overseen by the Employees Provident Fund Organisation of India (EPFO) and any company with over 20 employees is required by law to register with the EPFO.
It’s a savings platform that helps employees save a fraction of their salary every month that can be used in the event that you are rendered unable to work, or upon retirement.
Provident Fund Deduction from Salary:
When you start working, you and your employer both contribute 12% of your basic salary (plus dearness allowances, if any) into your EPF account . The entire 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer, while the balance 8.33% from your employer’s side is diverted to your EPS (Employee’s Pension Scheme) . It’s important to note that if your basic pay is above Rs. 6,500 per month, your employer can only contribute 8.33% of 6,500 (i.e. Rs. 541) to your EPS and the balance goes into your EPF account.
These funds are pooled together from many employees like yourself and invested by a trust. This generates an interest of 8% - 12%, which is decided by the government and the central board of trustees. The annual interest rate is available on the official EPF India website, and is currently at 8.75%.
EPF is active every time you receive your pay. If you’re changing jobs, it’s important to also update your EPF information with your new company, giving them your EPF number so that they can continue the contribution.
Interest on EPF:
The compound interest that’s decided upon by the government and central board of trustees is paid on the amount standing to the credit of the employee as on the 1st of April every year.
While your contributions are made monthly, the interest is calculated yearly. At the start of every year, you have an opening balance (which is the amount accumulated till that point). Your opening balance for the next year would be: opening balance + total monthly contributions + interest on the (old opening balance + contribution) .
It’s important to note that interest will only accumulate on your EPF balance and not on the funds that your EPS balance, as EPS is a pension scheme.
The employer contribution to your EPF is tax-free, and your contribution is tax-deductible under Section 80C of the Income Tax Act. The money you invest in EPF, the interest earned and the money you eventually withdraw after the mandatory specified period (5 years) are exempt from Income Tax.
What if I don’t want to pay PF?
Well, chances are that you’ve already started your professional career. The only time you can opt out of the EPF program is at the start of your career, when you tell your first boss that you don’t want to be a part of it and fill out Form 11 . If you’ve contributed towards EPF even once and have an account created in your name, you cannot opt out of this scheme.
Don’t worry though, as even though opting out of the EPF scheme increases your in-hand salary, it’s the easiest way to build a retirement fund. Having a little less spending power now could mean financial stability later. With the pooling of funds from you and your employer and the relatively high interest rates, you could be on your way to building a strong corpus of funds, without even realising it.
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So how do I find out how much I’ve got saved?
All your EPF details are available on the EPF India website. With the introduction of the UAN (Universal Account Number), you can now access all EPFO facilities online. You can also check your EPF details with your EPF account number.
Money gets credited for me into an account. When can I withdraw it?
Withdrawals are generally not allowed from your EPF account, unless you’ve given up working or want to be self-employed, etc. As per the rules, you can withdraw money from this account only if you have no job at the time you apply for a withdrawal and a waiting period of 2 months has passed. You’ll need to fill a declaration with a reason for the same. To withdraw your EPF balance, you’ll need to fill in Form 19 , sign it and have it attested by your former employer (or your bank manager/gazetted officer in case your former employer is uncooperative). You will need to submit this form along with a letter stating that you are relieved from your services to the company and a cancelled cheque from your savings bank account to the EPFO of your jurisdiction.
There are ways that you can navigate your way out of the mandatory 2 month waiting period, if you want your EPF amount immediately. Employees planning to settle abroad, or those who have landed jobs in a foreign country are eligible to receive PF withdrawal immediately after registration. You’ll need to submit proofs like a copy of your VISA or employment letter, as the case may be.
A lesser known waiver to the waiting period is that a female employee can withdraw her PF money if she is leaving service for the purpose of getting married. The proof for submission here can be your marriage certificate, or even your wedding invitation card. You can withdraw a portion of your EPF savings for the purpose of:
- Marriage or education of yourself, your siblings, or children.
- Addressing emergency medical expenses for yourself, spouse, children, or dependant parents.
- Repaying housing loans for a house owned by you, a spouse, or jointly by both of you. You can do this only after 10 years of service and contribution to EPF.
- Paying the costs of alterations/repairs to your existing home. You’ll need to have been in service and contributing for 5 years for alterations and 10 for repairs.
- If you’ve completed 7 years of service, you can withdraw 50% of your EPF contribution up to 3 times in your working life.
So what’s the big picture?
It’s recommended not to touch your EPF unless you’re in dire straits and have no other avenue through which you can acquire the funds you need in an emergency. EPF offers you an incredibly risk-free, secure and protected investment for your retirement. You can also opt to contribute more than the minimum 12% towards your EPF , but this is voluntary and the extra contribution does not need to be matched by your employer. While this effectively reduces your in-hand salary at the end of the month, it will be useful in the future.
EPF Contribution Breakup with Example:
Let’s look at this with a basic example:
Mr. Babu starts working with a basic salary of Rs. 20,000, and receives a 5% increment in salary every year.
He has worked for 35 years (starting at age 20, up to age 60) and has contributed 12% of his basic salary, which has been matched by his employer as 3.67% to EPF and 8.67% to EPS.
His total contribution in 35 working years has been Rs. 26.01 lakh and the company has contributed Rs. 7.95 lakh, making it a total contribution of Rs. 33.96 lakh.
This amount will grow to a total of Rs. 1.38 crore at the time of his retirement! (Assuming the rate of interest stays constant at 8.5%).
EPF withdrawal without employer signature
On realizing that getting the approval or attestation of an employer to facilitate a PF withdrawal has caused quite a bit of trouble for many employees, the EPFO has circumvented the process and now employees can make withdrawals without the attestation of their employers. The introduction of the UAN in the EPF had brought about this change, as now, employees just have to link their Aadhaar card to their UAN to make a withdrawal. Having said that, now making a withdrawal without the signature of the employer has two ways - with or without an Aadhaar card.
With an Aadhaar card:
- Now just by linking the employee’s Aadhaar card to his/her UAN, the whole process of getting the signature of one’s employer has been skipped for good.
- To facilitate a smooth process, employees should make sure that their Aadhaar card details and bank details are embedded in the EPFO’s member portal.
- The employer should have verified both - the Aadhaar card and the bank details.
- The employee has to make sure that his/her UAN has been activated before starting the process of making a withdrawal.
- Once you have met these conditions, download Form 19- UAN (for making PF withdrawals) and Form 10C- UAN (for making withdrawals from one’s pension scheme).
- Now, enter your name, address, registered mobile number, PAN card number, and the employee’s reason for leaving and date of joining. The employee should make sure that the details match that on one’s Aadhaar card and bank details. Any discrepancies could lead to a rejection of the application or a delay.
- Next, the employee should attach a cancelled cheque to the form and submit it to the regional EPF office.
Making a withdrawal without an Aadhaar Card:
- This process could be a little of an inconvenience, but if it is your last resort, then follow the process mentioned below.
- The employee should download the Form 19, Form 31 or Form 10C from the EPFO’s member portal, depending on where the withdrawal is going to made from.
- Once filled, the form has to be attested by an authorised signatory, such as a Gazetted officer, manager of a bank, magistrate, etc. While doing so, the authorized signatory has to sign every page of the form.
- Since you’ll have to state a reason for not getting the employer’s signature, state “Non-cooperation”.
- Next, the employer will have to attach an indemnity bond with a 100 Rupee stamp paper, attach one’s payslips, employment ID, appointment letter and Form 19.
- As a proof of address and identity, submit your regular KYC documents along with the attested form and cancelled cheque and the other papers of verification at the regional EPF office.
EPF customer care
For those employees wishing make queries regarding their PF account, be a delay in a claim being raised, discrepancies with regard to their contributions, inability to make a withdrawal and so on, the EPFO has a dedicated customer care service. For the those who are new to the EPF, follow the steps to find the EPFO’s customer care toll free number:
- Log on to the EPFO’s member portal
- On the top of the page, click on the ‘Contact Us’ button
- Once you have done that, the EPFO’s customer care toll free number will be displayed - based on the region the employer is located in.
EPFO digital signature
To make the process of transfer claims easier and transparent, the EPFO has introduced the digital signature of employers. Now, employers can approve claims by using their digital signatures. When an employer shifts organisations, his transfer claim has to be attested by either his previous employer or the present one, and this is when the digital signature of the employer comes into play. Back then, employers had to fill Form 13 and get it signed by their employers and then submit it to the regional EPF office. Now, the process has been simplified and can be done on the EPFO’s member portal. To have a digital signature, employers have to apply for a digital certificate- which contains their personal details such as name, email ID, APNIC account name, public key and the country of the employer. The digital certificate is issued by the Certifying authority and contains this identification key contains their required details that will be embedded in the EPFO’s member portal.
For employees who want to register a grievance, the EPFO has a dedicated part of their member portal for employees to fill in a grievance registration form and file a complaint. Employees usually face grievances with regard to withdrawals, PF settlements, transfer of accounts, settlement of pension and so on. For those who are new to the EPFO’s member portal, follow the steps to register a grievance:
- Visit the EPFO’s member portal - http://www.epfdelhi.gov.in/grievances.asp
- On the bottom of the screen, click on ‘EPF grievance system’.
- The page will then be directed to the EPFO’s grievance management system. On that page click on ‘Register grievance’ on the top bar.
- Once you have done that, the grievance registration form will be displayed.
- Now, fill in the registration form:
- Enter your status (Employer, employee, EPS pensioner)
- Enter your PF account number
- Then, enter where your regional EPF office is located
- Next, enter the name of your establishment and the address of your establishment
- After that, enter your name, address, pincode, country, phone number and email ID.
- The last part is to enter the grievance category - whether it is a transfer or withdrawal related issue, a pension settlement issue, etc. Select your grievance from the drop down bar.
- Upload your grievance letter, enter the captcha and submit your grievance registration.
Idle EPF account will earn interest
On April 1, 2011, the government of India decided against adding interest to EPF accounts that have been inoperable for 36 months or more. That meant, that despite the fact that some employees had money on their PF accounts, yet were inoperable, no interest was added to their funds. On November 11, 2016, the government reversed their decision and now, even inoperable EPF accounts will reap the benefits of having interest against it. As of 2015-2016, the interest added to EPF accounts was at 8.8% per annum. This applies to employees who have not withdrawn all their money from their PF accounts.
The UAN is a 12-digit unique number that has been given to every PF member. Before the introduction of the UAN, employees were inconvenienced by the fact that they had to keep shifting their accounts when they shift organisations, but now, the UAN controls all PF accounts of an employee and it can be functioned as one account. The UAN has made almost all processes of the EPF easier and convenient. Some of the benefits are:
- All PF accounts of an employee are unified and can be treated as one account under the UAN.
- Transfer from one PF account to another PF account can be done using the UAN.
- Using the UAN, employees can now make withdrawals from their PF accounts. For those employees who have linked their Aadhaar card to their UAN, they do not need the attestation of their employers to make a withdrawal.
- Using the UAN, employees can track their accounts, check the contributions, balance of their account and can manage their PF accounts all by themselves, without the hassle of their employer.
How to check EPF balance
Back in the day, EPF members could check their balance only once a year, to verify their contributions withdrawals and their outstanding balance. Now, with the introduction of the EPFO’s member portal and the UAN, checking one’s EPF balance is just a few clicks away. To check one’s EPF balance on the EPFO’s member portal, follow the steps:
- Visit the EPFO’s member portal - http://www.epfindia.com/site_en/KYEPFB.php
- Next, click on ‘Know your balance’ at the bottom of the screen
- Then, select the location of your regional EPF office
- Enter your PF account number and your mobile number
- Once you have done that, click on ‘submit’. In a few seconds you will receive a text message of your EPF balance
To check balance via UAN:
- Visit the UAN webpage - http://uanmembers.epfoservices.in/
- Next, enter your UAN and mobile number
- Next, select your EPF state and city
- Enter the captcha code and click on ‘submit’.
- You will receive an SMS of your EPF balance
An employee can even check his/her balance via SMS, missed call or on the EPF mobile app.
In April 2012, the EPFO launched the E-Sewa which is basically an online receipt of the Electronic Challan cum Return (ECR). Employers can enroll themselves for this facility just by registering their establishment code, their unique ID and choosing a secured password on the portal. The introduction has made the whole process of returns paperless, as now employers can view the electronic challan on the portal, view the annual account slips and can even print it if required. Once they have made a return, an SMS will alert them of the same.
For EPF members who need help navigating through the processes of the EPF or facing difficulties, the EPFO has set up a dedicated helpline to come to the aid of such members. The toll free helpline of the EPF is 1800118005.
Benefits of linking your Aadhaar card to your UAN
Since the Aadhaar card has now become the most valid source of identification in the country, linking one’s Aadhaar card to an employee’s UAN has enabled employees to make withdrawals, transfers and so on without the attestation of their employers. The Aadhaar card details linked to the UAN functions as a valid verification of the EPF member as well, enabling the member to perform various tasks related to the EPF seamlessly.
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