11 Essentials of Employees’ Provident Fund (EPF)

Employees’ Provident Fund (EPF) is a social security scheme provided by the Employees’ Provident Fund Organisation (EPFO). Under this scheme, both the employer and the employee contribute a part of the salary of the employee every month. The employee can get the complete amount on unemployment for two months or retirement. In this article, we will discuss 11 Essentials of the EPF that all employees should know:

 

 

The employee has to contribute 12% of the sum of basic salary, dearness allowance and retaining allowance under the EPF scheme. The employer also has to make an equal contribution. However, 8.33% part of the 12% contribution goes into Employees’ Pension Scheme (EPS) and the remaining 3.67% of the contribution goes into the EPF account of the employee. 

 

 

EPFO is offering interest on savings in EPF accounts of members at a rate of 8.55% for fiscal 2017-18. The Labour and Employment ministry takes into account various aspects and decides the interest rate to be provided in the next fiscal to the contributing members. 

 

 

Universal Account Number (UAN) is a unique 12 digit code provided to each and every member of the EPFO. All existing PF accounts of an employee are linked with his UAN. The UAN is linked with Aadhaar and PAN of the member. Whenever an employee changes his company, he has to provide only his UAN to the new employer. New PF account will be opened by the new organisation and old PF amount can easily be transferred into the new account online by visiting the unified EPF member portal.

 

 

EPFO has started providing most of its facilities online, be it account transfer, PF withdrawal or viewing the passbook. However, the member should have registered at the EPF member portal and completed the eKYC before availing the online facilities. The member has to submit his Aadhaar, PAN and bank account details to avail all such facilities. 

 

 

EPFO allows its members to withdraw the corpus accumulated in their EPF account, albeit with some restrictions. The EPF amount can be withdrawn partially or completely online. 

 

The claim has to be placed online for withdrawals amounting to more than ₹ 10 lakhs. In case of an amount less than ₹ 10 lakhs, withdrawal can be done both online as well as offline. The member has to fill Forms 31, 19 and 10C to withdraw money from his EPF account. 

 

In case of unemployment, the member can withdraw 75% of the corpus after the first month and the remaining 25% at the end of the second month of unemployment.

 

 

Employees can transfer their EPF balances from an existing EPF account to a new one. In fact it is advisable to do so, rather than withdrawing money from an existing EPF account. Withdrawing money from the EPF in case of continuous service less than 5 years will attract tax. 

 

When an employee changes his job, the new company opens a new PF account under the same UAN. The employee has to fill Form 13 in order to transfer the corpus into his new PF account. Alternatively, the member can fill the composite Form 11 to automatically transfer the amount from the PF account of the old company to that of the new PF account. 

 

 

EPFO members can withdraw the corpus accumulated in their EPF accounts before retirement under certain circumstances such as buying a new house, paying the home loan, marriage of children, etc. The amount withdrawn from EPF account prior maturity is known as EPF advances. It is worth mentioning here that the member is not required to repay the amount withdrawn.

 

 

EPF withdrawal is fully taxable if the amount is withdrawn before five years of continuous service. If PAN is provided, TDS is deducted at a rate of 10% else the TDS is deducted at a rate of 34.608%. The government does not deduct TDS on PF withdrawals if the age of the service (even though the member has switched various companies) is more than five years. The threshold limit for PF withdrawal is ₹ 50,000. 

 

 

EPFO members can avail PF services online through the Umang app as well. The app provides services to both the employer as well as the employee. A number of services can be availed online such as locating EPF offices, tracking claim status, getting account details by SMS, etc. The app also allows a user to get expert advice by using the live chat facility. Aadhaar seeding with the UAN can also be done through the app.

 

 

Employees contributing towards EPF for more than 3 years can utilise up to 90% of their accumulated corpus to make the down payment at the time of buying a new house or for paying EMIs of on-going home loans. 

 

 

An organisation having the strength of 20 or more employees is compulsorily required to register for EPF and contribute towards its employees’ PF. New organisations falling under these criteria can fill the Form 5A online to reduce the excessive paperwork. Earlier, the employer has to submit the Form 5A in addition to other required documents in a nearby field office of the EPFO. The employer had to go through the process even when the ownership of the organisation was changed which can now be done online.

 

EPF is one of those saving schemes that provide high interest rates and help in long-term savings. The scheme falls under the EEE (Exempt, Exempt, Exempt) category. This means that neither the principal amount nor interest is taxable. It allows a member to have a substantial corpus at the time of retirement.