What is EPF?

Employee Provident Fund, also known as EPF, is a fund managed by the Employee Provident Fund Organisation of India (EPFO). It is a retirement benefits savings plan in which each employee is expected to contribute 12% of their basic salary to the fund. The employer contributes similarly to the fixed-rate of 12 per cent, with the employer contributing 8.33 per cent to the employee pension scheme. However, a portion of this fund may be used in a financial emergency by withdrawing funds using EPF form 31.

EPF Interest Rate

After talks with the ministry of finance, EPFO reviews the EPF interest rate every year. The interest rate for the fiscal year 2020-2021 is set at 8.50 per cent.

KYC Requirement for EPF and Process to Update

To withdraw money from the EPF online, you must update your KYC records. It allows you to withdraw funds without the need for an employer’s signature. To update your KYC details, log into the EPFO e-portal and select the ‘manage’ tab from the KYC drop-down menu. PAN cards, Aadhar cards, ration cards, and other documents updated on the portal.

What is UAN (Universal Account Number)?

UAN is a 12-digit number assigned by EPFO in response to an employer’s order. It aids in the management of numerous member identification numbers (Member Id) issued by various organisations under a single universal account number. The number allows the employee to quickly remove their previous employer’s PF balance without relying on the employer.

For example, if an employee joins a new company, he may provide his UAN, marked with the new member id, after submitting the necessary KYC documents. If he does not have a UAN, he should provide the employer with a PF number when he quit the job. Visit https://unifiedportal-mem.epfindia.gov.in/memberinterface/ to check the status of UAN.

EPF contributions

EPF contributions are made every month by both the employer and the employees. The following is the amount of EPF contributions.

Contribution Percentage Contributed
Employee 12%
Employer 12%

Employee Contribution in EPF

Every month, an employee must contribute 12% of their basic salary. The employee participation rate for EPF is 10% in the following cases:

  • Jute, Beedi, Guar Gum Factories, Coir, and Brick are all products of this business.
  • Any manufacturing enterprise that the Board for Industrial and Financial Reconstruction has declared sick.
  • Any business or establishment with less than 20 employees is considered small.

Employer Contribution in EPF

Employers need to contribute a total of 13.61 per cent of a worker’s income to the EPF. The fixed-rate of 8.33 per cent is paid to the employee pension plan, and the remaining 3.67 per cent is contributed to the Employee Pension Fund. A further 1.61 per cent is charged in operating costs related to EPS and insurance.

For example

Consider the following example to obtain a clearer understanding of the EPF’s contribution.

  • When an employee receives a monthly salary of 40,000 dollars, their basic pay is 20,000 dollars. The following is a breakdown of the EPF:
  • Employee contribution: 12 percent of 20,000 = 2,400
  • Employer contribution: Aiming for EPS = 8.33 percent of 20,000 = 1,666
  • 3.67 percent of 20,000 = 734 dollars for EPF.

Employee Provident Fund Forms

EPF forms, which downloaded from EPFO’s e-portal, can register new workers for EPF and withdraw funds from EPF. the given most relevant forms available on the website.

  • Form 14 is used to purchase a life insurance policy through India’s Life Insurance Corporation (LIC).
  • Partial withdrawal, full settlement, and pension withdrawal benefit are all covered by composite claim forms.
  • Form 5 – New employee registration
  • EPF account transfer (Form 13).
  • Form 11 – EPF auto-transfer

EPF Withdrawal

EPF funds, unlike any other bank account, maybe withdrawn according to the following terms and conditions:

  • Even though EPF is a savings plan with funds withdrawn from the account after retirement, some provisions provide partial withdrawals to meet financial emergencies. The process is outlined in EPF form 31.
  • If an individual has been unemployed for more than one month, they can withdraw their EPF. After one month of unemployment, 75 per cent of the withdrawal is allowable.
  • Thus, there are three categories of EPF withdrawals: partial withdrawal, full settlement, and pension withdrawal value, all of which can be claimed using EPFO’s e-composite portal’s claim forms.

EPF Personal Loan

Employees can partially withdraw contributions made to an EPF account as an advance, which is known as an EPF loan, in the case of financial contingencies such as marriage, schooling, medical care, buying a home, or lockout, among others.

EPF Loan Process

  • Employees who meet EPFO’s PF loan eligibility requirements may apply for a PF loan online or in-person by submitting EPF Loan Form-31, 19 & 10C. They must use their UAN Member login information to access the EPFO portal and apply for an EPF loan online.
  • Furthermore, since EPF loans are not expected to be repaid, there is no PF loan interest rate; workers only lose out on interest that might receive on funds deducted from EPF accounts.
  • Employees may withdraw up to six times their basic monthly pay, or the total employee’s share plus interest, whichever is less, for the care of themselves, their spouses, or their children.
  • Employees will take out a PF loan if they meet the following criteria:
  • If account holders have worked for seven years, they will withdraw 50% of their EPF account balance for their education or their children’s education after matriculation.
  • If the account has been open for seven years, employees can withdraw up to 50% of their share of the funds for the wedding of themselves, their children, or their brother and sister.
  • You can borrow up to 24 times your basic monthly salary plus dearness allowance to buy the ground. If you need money for the house, you can take out 36 times your basic monthly salary plus the dearness allowance.
  • When the age of employ above 54, they are entitled to withdraw 90% of the gross corpus plus interest.
  • To deal with the COVID 19 emergency, employees will get a cash advance of up to three months’ salaries and dearness allowance, or up to 75 percent of their EPF account balance, whichever is less.

EPF Tax Rules

  • On deposits, withdrawals, and interest gained, EPF investments have EEE status. Please learn more about the EPF tax rules in depth.
  • Contributions to the Employees’ Pension Fund (EPF) are tax-free. You can deduct your annual EPF contribution under Section 80C of the Income Tax Act. 
  • EPF assets have EEE status on deposits, withdrawals, and interest received. Please read the following to obtain a detailed understanding of the EPF tax laws.
  • Employees’ Pension Fund (EPF) contributions are tax-free. The Income Tax Act of Section 80C allows you to deduct your annual EPF contribution.
  • Your EPF donation, as well as the interest received on it, is tax-free if you withdraw it appropriately after retirement. However, if you do not withdraw immediately, the interest gained from your retirement before you withdraw from the EPF account would be taxable income.
  • Unemployment: if you are unemployed for two months or more, you will withdraw your payment to the EPF account as well as the interest you have received. Suppose the accumulated balance is not automatically passed to the next employer or removed. In that case, the interest gain on such withdrawal will be taxable in the year it is earned.
  • On the job, pre and partial withdrawal: As we learned in the previous section, there are several circumstances in which you can withdraw a portion of your EPF. If you withdraw more than 50,000 from your EPF before completing five years of jobs, it becomes taxable.
  • The donation deduction claimed under Section 80C is added to your income in the year of withdrawal. Switching jobs in fewer than five years but moving your EPF to a new employer qualifies as continuous operation, and the amount transferred is tax-free.

Amount Time Of Withdrawal TDS
PF withdrawal amount > ₹ 50,000 Before 5 years of opening EPF account With PAN: TDS @ 10% Without PAN: TDS @ 34.6%
PF withdrawal amount > ₹ 50,000 After 5 years No TDS
PF withdrawal amount < ₹ 50,000 Anytime No TDS

Please notice that if you lose your job due to an unexpected situation, such as a lockout, decrease, or a medical condition, the TDS rule will not apply.

Interest income from the EPF is not taxable, according to tax laws. The amount of interest added to your EPF account from the moment you leave the job until you withdraw from the EPF account is taxable if you are unemployed, whether due to termination, resignation, or retirement.

Benefits of EPF Scheme

  • Employee Provident Fund members have financial protection and stability thanks to the EPF program. Here are a few more advantages of the EPF plan.
  • The employer contributes 8.33 per cent of EPF contributions to the employee pension plan under the EPF scheme. As a result, it will help create a retirement fund in the long run.
  • Employees may also seek tax benefits on their EPF contributions up to a cap of 1.50 lakh under Section 80 C of the Income Tax Act.
  • Members of the EPF may also withdraw funds from their PF account to meet particular needs such as higher education, home renovation, wedding expenses, or medical care.
  • Employees may also seek tax benefits on their EPF contributions up to a cap of 1.50 lakh under Section 80 C of the Income Tax Act.
  • Members of the EPF may also withdraw funds from their PF account to meet particular needs such as higher education, home renovation, wedding expenses, or medical care.

Latest News on EPF

  • How to Recover Your EPFO Password
  • The measures to recover your EPF password are as follows:
  • Go to epfindia.gov.in to access the official EPFO website.
  • Now choose to Forget the password from the drop-down menu.
  • After that, enter your UAN and Captcha code.
  • Verify the information by pressing the button. Your registered mobile number accessed.
  • Finally, fill in your details, including your name, date of birth, gender, KYC sort, and document number.

FAQs

What is the maximum age at which remove the entire sum of your EPF?

If you are over the age of 58, you will take your whole pension.

Is it possible for an employer to participate in the EPF scheme?

No, the employer pays 12% of the employee’s basic salary to the EPF.

What happens to EPF when a PF member passes away?

If the widow/widower or children have reached 25, the pension is passed to them.

What is the definition of a composite claim?

Several claim forms, such as forms 19, 10C, and 31, and UAN form 19, 10C, and 31, have been merged into a single composite claim form.  This form is used to withdraw funds in pension.

Is it possible to see the balance of your EPF account?

Yes, you can check your EPF balance by enabling UAN and downloading the EPF passbook, logging into your EPF account via UAN, or sending an SMS.

What form is used to credit the EPF interest rate to the account?

Compound interest is based on a monthly operating balance and credited at the end of the fiscal year.

Menu