Things you must know about EPF (Employees Provident fund)

What is EPF (Employees Provident Fund)?

Employees Provident Fund is a retirement benefits scheme under the Employees Provident Funds and Miscellaneous Provisions Act 1952. The fund is managed and overseen by the Employees Provident Fund Organisation (EPFO). In this post, let us take a look at all the things you must know about EPF (Employees Provident Fund).

Under this scheme, an employee has to pay a certain contribution from his/her salary towards the scheme and an equal amount of contribution is paid by his/her employer. An employee can withdraw PF at the time of his/her retirement and also during the service for some specific reasons.

Every establishment with over 20 employees is required by law to register with the EPFO. At present, according to the PF regulations, all employees drawing a salary less than Rs. 15000 per month have to mandatory become a member of PF.

Here’s is all you must know about the EPF (Employees Provident Fund).

How much do you contribute to EPF?

At present, 12 percent of your basic wages plus dearness allowance gets contributed from your salary to the PF account on a monthly basis.

How much does your employer contribute to EPF?

At present, according to PF regulations, your employer contributes an equal amount i.e. 12 percent of your basic wages plus dearness allowance. The total share of employer’s contribution does not go into EPF account. 8.33 percent of employer’s contribution goes to Employees Pension Scheme but it is calculated on Rs.15000.

Can an employee contribute more than 12 percent of the basic salary?

Yes, an employee can contribute more than 12 percent of his/her basic salary. Generally, employees contribute only 12 percent of their salary but they can contribute up to 100 percent of their salary (Basic + DA) in PF.

This is called the Voluntary Provident Fund (VPF). This Voluntary Provident Fund also earns tax-free interest. However, the employer can not contribute more than 12 percent.

What is the rate of interest for EPF account?

Currently, 8.65 percent is the rate of interest applicable on the PF contributions made by the employee and the employer. The interest in PF is calculated on monthly running balance. The interest rate for the financial year 2016-2017 and 2017-2018 was 8.65% and 8.55% respectively.

The rate of compound interest is decided by the government and the central board of trustees. It should be noted that interest will only accumulate on your EPF balance and not on your EPS balance as EPS is a pension scheme.

Are partial withdrawals/advances allowed from EPF account?

Yes, you can go for partial withdrawal/advance from your PF corpus for specific purposes/reasons like marriage (self, son, daughter, brother, and sister), education (self, son and daughter), medical treatment (self and family), purchase/construction of house/ flat, etc.

However, you can avail these partial withdrawal/advances if you have completed a minimum number of years. The amount of advance also depends on the specific situation and the number of years of service. And on such advances, you do not have to pay any interest.

What is the procedure for EPF withdrawal?

EPF can be withdrawn either by an online application or by submitting a physical application for EPF withdrawal.

How to check the EPF balance in your account?

If you do not know how much amount is accumulated in your EPF account, you can check it online. The entire process of checking EPF balance / passbook is very simple and hassle-free. Login to UAN member portal using your UAN (Universal Account Number) to check your EPF balance. If you want, you can also download or take a print out of your EPF passbook.

You can also check your EPF balance via SMS, by giving a missed call and via UMANG App.

What is UAN (Universal Account Number)?

UAN is a 12 digit unique number given by EPFO to its members. A universal number is generated for each of the PF (Provident Fund) Account Number at EPFO. No two PF members can have the same UAN. This UAN number remains the same even with the change of the job.

Because of this universal number, you can easily transfer your EPF balance in case of the job change. If you don’t know have your UAN, contact your employer.

To avail the benefits of the UAN, you have to activate your UAN. This activation is done through the UAN member portal. After your UAN activation, you can easily check your EPF balance through the UAN.

What is the importance of 5 years of continuous service?

People tend to switch jobs in their early career days, after leaving a job, they have two alternatives with respect to their EPF account. Either transfer their EPF balance to the new employer or withdraw their entire amount after the waiting period.

There is no tax on withdrawal amount if you have completed 5 years of continuous service. In the event, if you changed your job in less than 5 years and transferred your PF to the new employer then it will be considered as continuous service. Therefore, it is better to transfer your current PF to your new employer.

What are the tax benefits?

The employer contribution towards your PF is tax-free. The amount of your contribution is tax deductible under Section 80C of the Income Tax Act, 1961. But you cannot claim tax deduction under Section 80C on the employer's contribution.

The money you contribute in your EPF account, the interest you earned on it and the money you withdraw after completing the mandatory period of 5 years are exempt from income tax.

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