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Employee Provident Fund (EPF) – Contribution, Benefits & How to Withdraw PF Online?

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The Employee provident fund is meant to help employees save a fraction of their salary every month. So that they can use that fund in any event. Employers and employees both contribute 12% of wages to contribution accounts. Which is useful when needed in their future.

# What is EPF? 

The Employees’ Provident Fund (EPF) is a savings scheme launched under the Employees Provident Fund and Miscellaneous Act, 1952. If you are a salaried employee in India (mandatory for all employees who take a basic salary of less than Rs 15,000 per month) then you would know that every month a certain amount of money will be deducted from your salary as PF (provident fund). While it may be annoying that you are not able to spend hard-earned money, it is important to know why it is deducted and what does it benefit you?

# What is the Employee Provident Fund Scheme?

Employee Provident Fund is a retirement savings scheme mandated by the Government of India for all salaried employees. The funds deducted from your salary as a Provident fund (PF) goes to your PF account, which is maintained by the Employees Provident Fund Organization. As per law, all organizations in India that have more than 20 employees are mandated to register with EPFO. In simple words, it is a savings platform provided by the government to help the employees for their post-retirement life. 

# How Much Contribution Required for EPF?

As per the EPFO rules, a minimum of 12% of the basic salary needs to be deducted from the employee’s salary, which will be credited to the EPF account. While the full 12% of the employee’s contribution goes into the PF account, only 3.67% of the employer’s contribution is directed to the PF account, the remaining 8.33% is paid for the Employee Pension Scheme (EPS). 

It is important to note that EPF remains active till you continue to remain a salaried employee. If you switch jobs, it is paramount that you update the EPF information with the new employer so that they can continue the contribution of EPF.

# What are the Benefits of EPF?

EPF is beneficial at many point of times for entire life in different ways such as:

  1. Tax-Free Savings: The EPF scheme provides specific interest rates on deposits at certain rates which will already be decided by the organization. The Government of India makes both the actual deposit amount and the amount of interest received on the deposits to be completely tax-free.  Any withdrawal on maturity after completion of 5 years of employment or availing of a certain plan is completely tax-free. However, if you withdraw the deposit before time (i.e. before the completion of 5 years) it will not be exempt from tax. This feature of the scheme will help the employee to get better benefits which will be in the form of additional income to his savings.

  2.  Long-Term Financial Security: Funds deposited in this account cannot be withdrawn easily and therefore, helps to ensure savings.

  3. Retirement Period: The accumulated fund under this scheme can be used by the employee at the time of retirement. In the form of monetary security, this scheme provides relief to the retiring employee. EPF retirement benefits are very useful for everyone.

  4. Resignation/Quitting of Job: The employee post-resignation is free to withdraw his/her 75% of the EPF fund after one month of the date of having quit the job and the remaining 25% after 2 months of unemployment.

  5. Death: In case of death of the employee, the amount collected including the interest is given to the nominee of the employee. These EPF benefits after death will help the family to get through difficult times.

  6. Long run savings: This scheme is full proof and safe for individuals that wish to have investments in the long run.

  7. Liquidity of funds: This scheme is a good source of income for an individual at the hour of the financial crisis. The money received can be used to meet unavoidable expenses such as medication needs or education needs.

  8. Pension Scheme: The employer not only contributes towards the PF fund but also makes the necessary contributions towards the employee’s pension which can be later used by the employee after retirement.

  9. Insurance Scheme: This act provides for certain provisions where the employer of the organization is required to contribute towards the life insurance of the employee, but will not have group insurance. This scheme ensures that all employees are properly insured.

  10. Special Occasions: When you need money for a wedding, children’s education, special occasions for yourself or siblings, then you can withdraw up to 50% of your contributions. The member is allowed these benefits three times. To access these benefits, the member must have served for at least seven years. The members should also have the proper documents for the events.

Members can choose from their account for maintenance of a house, house repair, or loan repayment that you have taken to get a house.

# Who is Eligible for EPF?

If you are a salaried employee with a Basic + Dearness Allowance of less than Rs.15,000 per month, then you must have an EPF account, which is supposed to be created by your employer. As per Law, organizations with 20 or more employees are required to register for the EPF scheme, while those with less than 20 employees can also register voluntarily. If you are drawing a salary higher than Rs. 15,000 per month, you are non-eligible employee and it is not mandatory for you to become a member of the EPF, although you can still register with the consent of your employer & approval from the Assistant PF Commissioner.

# What is the Current EPF Interest Rate?

The current rate of PF is 8.50% p.a. The interest received on EPF Balance is exempted from taxes except after retirement. There is speculation that the EPFO may reduce interest in provident fund deposits for this fiscal year (2020-21), from 8.5 percent as provided for 2019-20 because of more withdrawals and lesser contribution by members this fiscal mainly due to the Covid-19 pandemic.

# How to Apply for EPF?

If you are applying for a new EPF account, you need to do so through your employer. You are required to provide all previous employment details in Form 11 and with all family particulars or nomination details in Form 2.

If you are an employer with an organization that employs 20 people or more, you must register under the EPF scheme. If your organization employs less than 20 people, you can still opt to register under the scheme. EPF registration requires you to submit details of your company, as well as details of each of the company’s owners. You can register for the EPF scheme on the official EPFO website.

# Step-by-step guide to EPF Registration for Employers?

  • Visit the government website Employee Provident Fund Organisation (EPFO)

  • Go to the section of ‘Establishment Registration’ that opens up a new page with ‘Instruction Manual’. It will explain the process of Employer Registration, followed by registration of DSC (Digital Signature Certificate) of the Employer which is a prerequisite for fresh application submission

  • Accept to – I have read the instruction, manual ‘tickbox’ to proceed and fill in the details to register

  • An email e-link is sent which has to be activated and a mobile PIN is also sent. Here you need to upload some documents to register

  • Those who are already registered can log in using their Universal Account Number (UAN)

What is UAN?

The Universal Account Number (UAN) is a 12-digit number that is unique to each member who is registered with the EPFO. This unique number is linked with the member’s PF account allotted by Employee Provident Fund Organization.

# Documents Required For EPF Registration

The following documents are required to be attached to the “Registration Form for EPFO” by the employer – 

  • PAN Card of the Proprietor/Partner/Director

  • Proof of address such as the Electricity Bill or Water Bill or Telephone Bill of the Registered Office (not older than 2 months)

  • Aadhar Card of Proprietor/Partner/Director

  • Shop and Establishment Certificate/GST Certificate/ any License issued by the government for the establishment

  • Digital Signature of the Proprietor/Partner/Director

  • Canceled Cheque or Bank Statement of Entity

  • Hired/Rented/Leased Agreement if any

# What is the Process of EPF Withdrawal?

EPF India members can withdraw EPF by submitting a withdrawal application offline or through EPF online portal.

  • For offline submission – 

    • Individuals are required to fill up a ‘new composite claim form’ or a ‘composite claim form” and submit the same to the EPFO office under their jurisdiction.

    • An overall claim form must be verified by their employer. 

  • For online submission –

    • Individuals must have an active Universal Account Number (UAN).

    • The mobile number used to activate the UAN must be activated.

    • UAN must be combined with Aadhaar. They would also need the PAN and respective bank details (i.e. Bank passbook, Cancel cheque) with its IFSC code. 

    • After ensuring that all the prerequisites are in place, they need to login into the UAN online portal.

    • Individuals are required to verify their KYC details and then proceed as per the instructions.

Being a retirement-oriented scheme, the primary purpose of the Employee Provident Fund is to enable individuals to become financially prepared for their retired life. This being said, individuals should try to avoid premature withdrawal if it is not necessary. 

# Conclusion:

EPF is perhaps the easiest way to save money for the future without any hassle in future. 

  • The contribution made to EPF gets a deduction under Section 80C and the interest earned is tax-free. That works under the EEE (Exempt, Exempt, and Exempt) tax regime. However, EPF is better than others in two aspects –

    1. In the case of EPF, the employer also contributes to the fund. There is no such contribution in the case of others.
    2. The rate of interest on EPF is also marginally higher (currently 8.50%) than others.

Frequently Asked Questions:

# Can an employer reduce the employer’s share of EPF contribution?

No, employers cannot reduce their share of EPF contribution. Such deduction is considered a criminal offense.

# Is there any age restriction for an employee to become a member of EPF?

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, then he/she cannot become a member of the Pension Fund.

# How is EPF contribution calculated if the employee is paid on a daily or partial basis?

The contribution amount is calculated from the salary amount that is paid in the calendar month not as per the days of working.

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