This scheme is an initiative by the Employment Provident Funds’ Organization. It is a popular savings scheme that enables employees to save money by making systematic investment plans. It helps the employees to accumulate retirement corpus to provide regular income post-retirement. This scheme is governed by three Acts. They are the Employees’ Provident Fund Scheme Act 1952, the Employees’ Deposit Linked Insurance Scheme Act 1976, and the Employees’ Pension Scheme Act 1995.
The investments in this scheme are generated through the contribution of the employer and the employees. Each contributes 12% of the employees’ monthly salary towards the investment amount. Let us look into more details of this scheme.
Eligibility Rules For EPF
- Every Indian resident except the individuals from Jammu Kashmir can apply for this scheme.
- Employees from both public and the private sector can apply for it.
- Salaried employees with monthly income less than Rs.15,000 have to register for an EPF account.
- If any organization or a company has more than 20 employees then it has to register itself for this scheme.
- If the organization has less than 20 employees then they too can register voluntarily.
- Employees with a monthly salary of more than Rs.15,000 can also apply for this scheme. However, they need the approval of the Assistant PF Commissioner.
Salient Features Of EPF
- Generation of the corpus for retirement: this scheme is highly beneficial for the generation of the post-retirement corpus. As the employees contribute their monthly income towards the Employee Pension Scheme the sum accumulated over the years helps to generate this corpus. This enables retired employees to establish financial stability and independence.
- Pension and insurance scheme: employers make a significant contribution towards the pension scheme and the Life Insurance of its employees. This can be later used by the employees’ post-retirement.
- Emergency corpus: as emergencies arise without knocking on the door, the corpus through this scheme can subdue the financial crisis on the account holder.
- Tax-saving: there are several tax benefits under this scheme. According to Section 80C deduction can be claimed on the employee’s contribution to this account. The corpus generated is also exempted from tax.
- Premature withdrawals: as per this scheme the applicants can easily withdraw their investment amount before the maturity of the scheme.
- Loss of employment: if the individuals lose their jobs due to any reason then, the invested amount can be used to meet the expenses.
- Resignation: if the employee resigns from his job then, he can withdraw 75% of the investment. The remaining 25% can be withdrawn after 2 months of unemployment.
- Death: if the employer dies due to any untoward circumstances, then these funds can be claimed by nominees.
- Disability: if the account holder is not in a position to work, then he can use the funds from his EPF account.
- Accessibility: with the help of the Universal Account Number (UAN), the EPF account can be easily accessed by the account holders.
Universal Account Number (UAN)
The employees with an EPF account can access their accounts, check the balance, and withdraw online. The Universal Account Number (UAN) is the key to using online services by the EPFO. UAN is a 12-digit number that is uniquely allocated to every applicant of this scheme. It is mandatory for the subscribers of this scheme to activate a UAN. It is permanent and does not change if the individuals change their jobs. The UAN can be generated by the employers or through the portal https://unifiesportal-mem.epfindia.gov.in/memberinterface/ .
Some of the benefits of UAN are:
- The EPF accounts of employees are unified and they can be accessed by the UAN.
- UAN facilitates the transfer from one EPF account to another.
- The withdrawals can now be made using UAN. If the employees have linked their Aadhar card then they do not need the attestation of their employers.
- Tracking the account, checking the contribution, the balance of the account has never been easier without UAN.
Services offered by the Employment Provident Fund Organization (EPFO)
1. Helpdesk for inoperative accounts
Through this facility, individuals can track their dormant and other inoperative accounts that are not generating any interest. These funds can either be withdrawn or transferred to a new account.
2. Online withdrawal of EPF
The withdrawal from the EPF account can be done easily online. This is facilitated using the UAN.
3. Certificate of Coverage for International workers
The applicants of this scheme who are employed in countries with Social Security Agreements with India can get a Certificate of Coverage (CoC) through the online services by EPFO.
4. Monthly returns for exempted establishments
The exempted establishments can avail of monthly returns through the online services offered by the EPFO.
5. UMANG app
This app was launched by the EPFO to help its account holders to view their passbook, update their profile details, etc. The app works on the UAN and the password of the individuals.
6. Online transfer of EPF
The employees can easily transfer their funds from the previous employer to the new employer through the online services offered by the EPFO. This process is easy, hassle-free, and fast.
7. Establishments can register online
The Online Registration of Establishments (OLRE) is done through the EPFO portal.
8. Online payment of provident fund
This is a necessary feature under the EPFO. Every company has to make payments online.
9. Missed call and SMS services
The EPF balance, contributions, status of KYC can be notified to the employees through the SMS and the missed call services.
10. Claim status and passbook
The EPFO portal also enables its subscribers to check the status of their claims and view the passbook with the help of UAN.
If there is any issue with the transfer of the EPF account, settlement of pension, withdrawal of PF, etc. then the employees can report these queries online. The EPFO gives top priority to every complaint of its subscribers.
Registration On The EPFO portal
Registration on the EPFO portal can enable the account holder to avail of a host of online services.
The registration can be completed by following the steps given below.
- Visit the EPFO portal and click on the option ‘Online Services’ and then select the option ‘For Employees’.
- Then click on the Member UAN/Online Services option. This will redirect the users to the e-Sewa portal where the registration can be done by clicking on ‘Activate UAN’.
- Details like the date of birth, mobile number, Aadhar card number, PAN, and UAN should be submitted.
- Once the details are submitted, the portal will validate the details by sending an authorization PIN to the registered mobile number.
- This marks the end of the registration process.
EPFO login for employees and employers
1. For employees
- On the official website of EPFO in the section ‘Online Services’ click on ‘For Employees’. On the new dashboard go to Member UAV/ Online Services. Or else the individual can directly go to the EPF Member’s Portal/e-sewa portal.
- If the UAN is active then the individual can directly login using this 12-digit number. Or else the UAN will have to be activated. Below the login button, there will be an option ‘Activate UAN’. Click on this button to activate the UAN.
- Once the UAN is activated the individual can check the balance and claim the settlement or withdraw the amount anytime.
2. For employers
- On the official EPFO website, they should click on ‘For Employers’ from the ‘Online Services’ section.
- After the successful registration to the EPFO portal, the employers can directly login using their username.
The KYC documents can be updated on the e-Sewa portal of the EPFO website.
- After the individual logs in the EPFO portal with the UAN, he can access the manage KYC option and update the documents on the portal.
- The number of documents and the name of the member will have to be updated.
- If any of the documents are expiring then they will have to be updated as well.
- After uploading the changes will be saved.
- The employer can easily access the updated documents and provide approval.
- The employee will be notified about the employer’s approval through an SMS.
Contributions To The EPF
Every month the employee and the employers make contributions towards the EPF account. The contribution is 12% of the employee’s monthly salary made by the employer and the employee each.
1. The employee’s contribution
The employer contributes 12% of the employee’s monthly salary on monthly basis and credits this amount to the EPF account of the employee. However, the employees of some organizations are charged 10% under the following circumstances.
- If the organization has a maximum of 19 workers.
- If the industry is declared as sick by the BIFR.
- If the organization is suffering from continuous losses.
- If the organization is operating under a wage limit of Rs.6,500.
2.The employer’s contribution
The employer’s contribution is also 12% of the employee’s monthly salary. But this contribution is split into the following aspects.
|Category||Contribution in percentage|
|Employees Provident Fund||3.67|
|Employees’ Pension Scheme (EPS)||8.33|
|Employees Deposit Link Insurance Scheme (EDLIS)||0.50|
|EPF Admin charges||1.10|
|EDLIS Admin charges||0.01|
Types of EPF forms
There are several forms used for the application of this scheme.
|Name of the form||Use of the form|
|Form 2||The nomination and declaration form.|
|Form 5||The registration form.|
|Form 31||The Employment Provident Fund Advance Form is used when the applicant needs to withdraw, avail a loan and advances from his EPF account.|
|Form 10D||Monthly pension payments can be availed through this form|
|Form 10C||Several benefits under the EPF scheme are claimed through this form.|
|Form 13||The transfer of the amount from the previous job to the new job is achieved by filling this form.|
|Form 14||This form is used for purchasing an annuity.|
|Form 15G||This form is used for availing of several tax benefits.|
|Form 19||The final settlement of the EPF account is claimed by this form.|
|Form 20||If the account holder passes away, then his family member can use this form to withdraw the invested amount.|
|Form 51F||This is the nominees form to claim the benefits from the Employees’ Deposit Linked Insurance.|
Payments to the EPF account
The monthly payments to this account can be made as follows.
- The account holder should first login to the EPFO portal.
- Next, click on the ‘Payments’ option and then click on ‘ECR upload’.
- Then he should input the wage month, Date of Salary Disbursal, and the Rate of Contribution.
- Then he should upload the ECR text file. If the file is uploaded then the text ‘File Validation Successful’ will appear or else an error will be generated.
- Click ‘Verify’ when TRRN is displayed on the screen.
- ‘Prepare Challan’ should be clicked to generate a summary sheet.
- Then ‘Generate Challan’ should be clicked in the Admin section.
- Proceed to make the payment by clicking on ‘Finalize’.
- Select the payment mode and make the payment.
- After the payment is successful confirmation will appear with an e-receipt. The e-receipt can be uploaded on the EPFO portal.
The EPF passbook contains all the details of the contributions made by the employer and the employees. It also contains other details like name and establishment ID, office name, employee’s share, employer’s share, member ID and name, contribution details, etc. The EPF passbook can be downloaded online from the EPFO portal.
Balance In The EPF Account
The balance in the EPF account can be checked by using the following methods.
1. EPFO Portal
This method is easy to go about. The account holder has to log in using the UAN and the password. After successfully logging in the account holder will be able to check the balance under the member ID.
- Visit the website www.epfindian.gov.in
- In the section ‘Our Services’ click on ‘For Member’.
- Then select the option ‘Member Passbook’.
- Enter the UAN, password, and captcha code to log into the account.
- To view the passbook, select ‘Member ID’.
2. UMANG App
The Unified Mobile Application for New-age Governance (UMANG) app can also be used to check the balance of the EPF account. The claims can also be tracked and raised from this mobile app.
3. Missed Call Service
Toll-free number 011-22901406 can be dialed from the registered mobile number to check the balance in the EPF account.
4. SMS Service
An SMS can be sent to the number 7738299899 to check the balance of the EPF account.
Online Transfer Of The EPF Account
The EPF account can be transferred from one financial company to another.
This can be achieved online by following the steps given below.
- Using the UAN and the password log into the EPFO members portal.
- In the ‘Online Services’ tab select the option ‘Transfer Request’ to generate an online transfer request.
- Verify all the details that were previously submitted. This included the date of birth, date of joining, etc.
- Once verified, check the details of the previous employer thoroughly which the individual wants to claim.
- After submitting these details, an OTP will be sent to the registered mobile number. The OTP has to be submitted to authenticate the identity. Now an online filled-in form will be generated which has to be signed and sent to the previous employer.
- On the other hand, the employer will also be notified about the transfer request. After the employer verifies the employment details, he has to forward the claim to the EPFO Office.
- After the submission of the request the status of the transfer can be checked under ‘Track Claim Status’. This is under the ‘Online Services’ menu.
Withdrawal From The EPF Account
Partial withdrawal from the EPF account is allowed to meet various expenses. The withdrawal amount is directly proportional to the valid reason. A lock-in period is also present for the partial withdrawal.
Some of the few circumstances may be as follows.
- To pursue higher education.
- Repayment of existing home loan.
- Purchasing or renovation of a housing property.
The entire amount invested in this scheme can also be withdrawn.
This could be due to several reasons.
- Attainment of retirement age.
- Death of the family members
- Permanent relocation
Although premature withdrawals are allowed care should be taken that withdrawals before the completion of 5 years of the account give rise to the following.
1.Benefits under Section 80C will no longer apply to the account holders: If the applications had earlier availed of benefits under Section 80C then, upon the withdrawal of the entire amount the interest that they have earned so far will be taxed.
2.The withdrawn amount will be taxed: After the withdrawal of the invested amount within 5 years, it will be added to the taxable income. If the amount withdrawn is more than Rs.50,000 then 10% of the tax is deducted on this amount. But if the account holder submits Form 15G and Form 15H then he can be exempted from paying the additional amount.
Eligibility For EPF Withdrawal
1. For Medical Purposes
- For this purpose, the employees can either withdraw 6 times his monthly salary or the employees share with interest. Whichever is lower.
- The amount can be used for the medical treatment of the employee, his spouse, his children, and his parents.
- The lock-in period does not apply to this withdrawal.
2. For Repaying A Home Loan
- Up to 90% of the corpus can be withdrawn to repay any existing home loan if the property or house is registered in the employee’s name or held jointly.
- But to withdraw the amount for this purpose the employee should complete at least 3 years of service.
3. For A Wedding
- The employee should complete 7 years of service to avail of this withdrawal.
- The maximum withdrawal can be 50% of the employee’s contribution along with interest.
- The withdrawal can be made for the employees, his siblings, or his child’s marriage.
4. For Renovation Or Reconstruction Of The House
- The house should be registered under the employee’s name or held jointly.
- The withdrawal amount can be 12 times the monthly salary from the EPF account.
- The employee should complete 5 years of service to avail of this withdrawal.
5. For Constructing A New House
- A partial amount can be withdrawn from this account to purchase a new plot or to construct a new house.
- The property should be registered in the employee’s name or can be jointly owned by the employee with the spouse.
- The employee must complete 5 years of service to avail of this withdrawal.
- The amount that can be withdrawn is equal to 24 times the monthly salary for purchasing a plot, 36 times the monthly salary for constructing a house, or the cost of the property or the total of the employees and his employers share along with interest.
- This withdrawal can be done only once in the entire tenure of the EPF account.
- After the completion of 58 years, the employee can withdraw the entire corpus.
- This is equal to 90% of the EPF balance.
- If an individual is unemployed for over a month then he can withdraw 75% of the amount invested in the provident fund.
- If the unemployment extends for more than 2 months then the individual is allowed to withdraw the remaining 25% as well.
8. Withdrawal Rules
This scheme is specially designed for retirement. Thus, unnecessary withdrawals are not permitted by the EPFO unless it is an emergency. Here are some rules that should be kept in mind before withdrawing the EPF funds.
- The funds that are withdrawn before 5 years of opening the account are liable for taxes.
- If the employer is changed then withdrawing the funds is not the best idea. Instead, these funds can be transferred to the new account through the online process.
- The loan facility can be availed on the EPF funds.
- 90% of the finds can be withdrawn after the employee turns 54 years.
- If any employer remains unemployed then he can withdraw 75% of the EPF funds. The remaining 25% can be withdrawn only if he remains unemployed for more than 2 months.
9. Withdrawal After Retirement
- After an individual retires at the age of 58 or more, he has to apply for a claim of his settlement.
- The total balance in the EPF account consists of contributions from the employer and the employee.
- If any individual has served for 10 years then also becomes for the EPF amount.
- If the individual has not completed 10 years of service then he can also withdraw the full amount after his retirement.
- The individual is eligible for pension benefits if he completes 10 years of service.
- The corpus is tax-free if the withdraw is made after the retirement of the employee.
- However, the interest earned on the corpus is taxed.
- If the employee fails to withdraw the EPF amount after 3 years from his retirement then the interest earned during this time will be taxed.
The Procedure For Withdrawal Of EPF
The procedure for the withdrawal from the Employment Provident Fund Scheme can be completed both online and as well as offline.
To proceed with the online withdrawal the registered mobile number and the Universal Account Number (UAN) should be active. The Aadhar card and the PAN card should be linked to the UAN number. After all the theses conditions are met, the account holder should log in to the online EPF portal. After verifying the KYC documents the instructions for the withdrawal of the amount should be followed.
- First, open the EPFO portal and sign in to the UAN Member Portal using the UAN and the password.
- Click on the ‘Online Services’ from the top menu bar. Select ‘Claim’ from the drop-down.
- Next, enter the 4-digit bank account number and click ‘Verify’.
- On the certificate of undertaking click ‘Yes’.
- Then ‘Proceed for Online Claim’
- Select ‘PF Advance’ to withdraw the amount.
- Lastly, select the ‘Purpose for which advance is required’.
- Submit the application.
- Scanned documents may be needed to verify the purpose of withdrawal.
- Then the employer has to approve the withdrawal. This will be notified to the account holder through a SMS on the registered mobile number.
- The ‘New Composite Claim Form’ should be duly filled and submitted to the Employment Provident Fund Organization.
- This form has to be attested by the applicant.
Documentations needed for withdrawal
Here’s a list of documents needed for the withdrawal of the EPF account.
- Composite Claim Form.
- The Universal Account Number (UAN) is the most important necessity for the withdrawal.
- The bank account details of the EPF account should be mentioned.
- The bank account should belong to the employee.
- Personal details like the father’s name, date of birth, should be matched with the identity proof.
- The details of the EPFO should be submitted.
- Identity and Address proof.
Taxation on the withdrawal of EPF funds
- The TDS is reduced on withdrawals before the completion of 5 years of service.
- 10% of the TDS is reduced if the PAN is furnished and 34.608% if it is not furnished.
- If the amount to be withdrawn is less than Rs.50,000 then TDS is not reduced.
- The employees have to fill Form 15H/15G to proclaim that the total income is not taxable.
- If the employee transfers his funds to the National Pension Scheme account then he is not liable to pay any taxes.
TDS is not applicable in certain circumstances as follows.
- If unemployment is a result of company lockouts, retrenchment, or employee layoffs.
- If the employee has to give up employment to severe medical conditions, physical disability, or mental disability.
How to avoid TDS on withdrawals?
- The funds should be withdrawn after the completion of 5 years of service. This will not attract any TDS.
- While changing a job transfer the account instead of withdrawing the amount. This will save a lot of tax burden on employees.
- If any employee is on a career break then he can earn interest on the EPF funds without any contribution for up to 3 years. But the interest earned in this case is taxable.
The interest rate earned through the EPF
The interest rate for every financial year ranges between 8.00% to 8.50%. The interest earned on these investments is exempted from taxes. It is generated on the amount contributed by the employee only. The amount contributed by his employer does not generate any interest.
This excludes any shares contributed towards the account. The monthly interest generated is transferred to the Employment Provident Fund account of the applicant. The interest rate changes every financial year. The interest rate calculated on the monthly basis is credited to the EPF account at the end of the financial year.
If these contributions are not made for a continuous streak of 30-60 months then the account will be declared dormant. The interest can only be earned in the investment of individuals who have not retired. After the individual is retired there is no interest generated on that amount.
Calculating the interest rate
The interest is earned every month. Thus, the chargeable interest rate per annum is divided by 12. Suppose the interest for the financial year 2019-20 is 8.55%. then the interest rate per month is (8.55 / 12) %= 0.7125%.
Suppose the monthly salary of an individual is Rs.20,000. Then the 12% of 20,000= Rs.2,400. This amount will be transferred to the EPF account of the salaried individual.
Apart from the employee’s contribution the employers too contribute towards the EPF account of their employees. This contribution amounts to 3.67% of the monthly salary. 3.67% of 20,000 = Rs.734.
Thus, the total contribution from the employer and the employees sums up to Rs.2,400 + Rs.734 = Rs.3,134. The total interest earned in a month is Rs.3,134 x 0.7125% = Rs.22.32. The monthly interest generated will be credited to the account holders’ EPF account towards the end of the financial year.