The EPF or Employees’ Provident Fund Act is a savings scheme. It was introduced under the Employees’ Provident Fund And Miscellaneous Act in 1952. The Central Board of Trustees designed the act. The board of trustees consisted of the government, employers, and employees.
The EPF act is a pension scheme designed to protect the future of the employee after retirement. The Employee’s’ Provident Fund Organisation was formed for the betterment of the employees.
This EPF act aims to encourage employees to save money for a better future. Through the EPF act, an employee contributes a part of his/her salary to the account. This amount is then given to the employee at the time of retirement. But there are some certain rules and regulations under this particular act.
Eligibility Criteria For EPF
One needs to be eligible for registering in the EPF. What are the criteria that one needs to fulfill for being eligible for EPF? Below are the criteria which are mandatory for everyone.
- The employees need to be an active member of the EPF scheme. This will make them eligible to avail of the benefits and savings which come under this act.
- The organization needs to have a registration in the EPFO. This would help the employees registering for the EPF account.
- An organization that has more than 20 employees has to give EPF to the employees.
- Employees need to register for the EPF to get the desired benefits.
How To Register For EPF?
i. If one wishes to register for the EPF scheme, then he/she needs to visit the official website of the EPFO.
ii. Now you have to select the “Establishment Registration” option. It will open a new page full of instructions. This particular page will explain the whole process for Employer Registration. It is then followed by a DSC or Digital Signature Certificate of the employer. Here, the signature of the employer is required. This signature is important for a fresh application.
iii. After reading the terms and conditions, one needs to accept the conditions. You can do this by selecting the dialogue box, stating that “I have read the instruction manual.” Now proceed to fill in the details for registration
iv. Once all the details have been provided and submitted, an e-link is sent to the device. The individual needs to activate the link by clicking on it. After activation of the link, one needs to upload all the documents on the page.
After following the above steps, the account for an employee is opened.
EPF UAN Activation
UAN is the Universal Account Number that every employee gets from the EPFO. This UAN number was introduced recently for the benefit of the employees. The UAN acts as an umbrella under which all the EPF accounts can co-exist. The sole reason for the development of UAN is that an individual changes his/her career many times. Due to this, it can be difficult for the individual to manage different EPF accounts. To make things simple, the EPFO has now generated the system of UAN. Here all the EPF accounts of an individual can co-exist. With the help of UAN, one can even check the savings amount in his/her EPF account directly.
The UAN helps in managing the different EPF accounts without any problem. The employees who have recently registered for an EPF account already have the UAN. Older employees should register for UAN and get to manage the EPF account directly.
To activate the UAN, one needs to visit the official website of EPF. After that, one needs to select the “Activate UAN” option and then fill in the required details. After filling in the details, an OTP will be sent to the registered mobile number. After confirming the number, the UAN will get activated. Now, you can easily check the status of your account through the UAN.
One should get a “New Form No 11- Declaration Form” while joining a new organization so that they can add the existing EPF account on the UAN and activate the UAN for the new job.
Interest Rate On EPF As per the rules of the EPF Act, an employee whose pay salary is under INR 15000 should register for the EPF account. The employees must register for the EPF account with the stated salary. If an employee whose pay is more than INR 15000 wishes to register for EPF, he/she can do so. But the employee has to take the permission of the Assistant PF Commissioner. But such employees also need to take the permission of their employers.
However, certain interest rates apply to the EPF account. For the year 2019-20, the interest rate is 8.50%. The amount of money that is kept at the PF account is eligible for interest. The interest which is earned on the PF account is directly transferred to the EPF account. If there is no contribution to the account for at least 3 years, then the account is declared dormant.
The interest of the EPF account is provided for employees who have not yet retired. It has been done so that they can benefit from the savings after retirement.
Types Of Contribution For The EPF
For the EPF scheme, both employers and employees have to contribute a certain amount of their salary towards the account. However, there are 2 different types of contribution, which is discussed below.
1. Contribution By Both Employer & Employee
As the act states, both the employee and the employee need to contribute to the EPF account. While the employer needs to pay around 12% of his/her salary for the EPF, the employee also needs to pay 12% of his/her salary. However, if the organization has less than 20 employees or has any other exceptions, as stated by the EPFO, both employee and employer need to contribute only 10% of their salaries.
But, 8.33% of the employer’s contribution goes to the pension allowance. The rest of the amount is then transferred to the EPF account of the employee.
2. Voluntary Contribution Of Employee
An employee can even contribute a higher amount of his/her salary to the EPF scheme. This type of contribution is defined as Voluntary Provident Fund, which is calculated separately. However, in this case, the employer is not forced to contribute more than 12% of his/her salary for the EPF scheme. The benefit of the VPF is that it is tax-free interest. Hence one can enjoy the benefit of the complete contribution without paying any tax.
Withdrawals From EPF Account
As per the EPF act, an individual can only withdraw the money from his/her EPF account after retiring from the job or after 55 years. This rule was established to discourage any premature withdrawals and encourage people to save money for a better future.
However, one cannot withdraw the whole EPF amount at the age of 55. An employee can only withdraw 90% from the EPF account. After this, the balance amount will be provided after retirement. However, as per the recent change in actin 2018, an employee can withdraw 75% ofter the remaining unemployed for one month. The remaining 25% of the EPF account can be withdrawn after 60 days of unemployment.
For withdrawing money from the EPF account, an employee needs to use the UAN base form 19. The employer needs to sign this form so that the employee can withdraw money.
Importance Of 5 Years Of Continuous Service
An individual is inclined to change jobs throughout their career. But what happens to the EPF after they leave the job? As per the rules of EPFO, the employees have 2 options in their hands. An employee can withdraw 75% of the EPF account’s money after waiting for 1 month of unemployment. If an employee remains unemployed for 2 months, then he/she can withdraw the complete amount from the EPF account.
Another option is that an employee can transfer the EPF account to the new employer and then treat it as one EPF account only. Now, coming to the point, what is the importance of 5 continuous years of service? A person who has done service for more than 5 years in an organization will have an EPF account free of tax. In other words, one does not have to pay any tax on the amount of the EPF account if he/she has worked for more than 5 years. This particular rule was made so that an employee would be spared from paying taxes at the time of retirement. By excluding the tax amount, the employee would get the exact amount at the time of retirement, which he/she can use for the retirement life.
If a person switches jobs and has transferred the existing EPF account to the new employer, it is considered a single account. If you have worked for 2 years in an organization, after which you have switched the job to another organization and transferred your existing EPF account to the new employer, it would only be considered one EPF account. In this case, if you work for another 3 years in the new organization, then your EPF account will be free of tax.
EPF advances are basically a type of loan where the employee does not have to pay back the whole amount. The EPF account is designed to take care of the employee after retirement, and the employee contributes to this account. But, in times of emergencies, an employee can withdraw money from this account.
One can withdraw a certain amount of money from the EPF account in case of emergencies. Emergencies such as health issues or for repaying the money are considered emergencies. These advances are allowed only in special cases, and it is highly discouraged to withdraw the EPF money before the age of 55. This particular rule was made so that an employee can get financial help in times of emergencies. Moreover, the EPF account serves as an emergency account for the employee by providing financial help in tough times without charging any kind of interest.
1. What is the EPF scheme?
The EPF scheme is a pension scheme or a savings scheme designed by the government to encourage people to save money. Both the employee and the employer contribute a certain amount of money to the account. The employee can avail of the amount at the time of retirement.
2. Is it necessary to link my EPF account with UAN?
The government has made it mandatory to link the EPF accounts with UAN. The major benefit of UAN is that you can view the status of all your EPF account on a single page. It is hassle-free and avoids any confusion
3. Is it necessary that the employer has to contribute to the account?
Yes, the employer must contribute 12% of his monthly salary to the EPF account. The employee is also required to contribute the same amount of money to the account.
4. What will happen if there is no contribution to the EPF account for some years?
If there is no contribution in the EPF account for around 3 years, then the EPF account is declared as dormant or non-existent. Due to this particular reason, EPFO prohibits from providing the EPF scheme to any start-up which has been in the market for less than 3 years or has less than 20 employees.
5. Can I transfer my existing EPF account to my new job?
Yes, you can transfer your existing EPF account to your new employer by filling out the required forms. After transferring the amount from the previous EPF account to the new EPF account, EPFO will consider the present EPFO account as one account to benefit from the 5 years of continuous service terms.
EPF is one of the easiest ways to save money without any problem. One needs to join an organization registered with the EPF scheme and then open an account. One of the major advantages of having EPF is that, even if the employee dies, the whole amount goes to the employee nominated by the employee. Here, the employee is encouraged to nominate an immediate family member so that there won’t be any family problem. EPF is basically made so that a person can even live peacefully after retirement, as he/she would get a monthly allowance from the pension scheme.