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What is EPF (Employees Provident Fund) in India?

Almost all salaried professionals end up not receiving an elusive chunk of their monthly salary towards EPF deduction. Hence the question arises, why this deduction and where does this money get accumulated? The answer is Employee’s Provident Fund.

Commonly known as EPF, this is typically a retirement benefit scheme which is available to all salaried employees. EPF is looked after and maintained by the Employees Provident Fund Organisation of India (EPFO) and a registered company with over 20 employees is mandated by law to register with the EPFO.

Employee Provident Fund is a good savings platform that assists employees in saving a fraction of their salary every month. This amount can be used in the event that you are rendered unable to work, or upon retirement.

Deduction of Provident Fund from Salary

From the moment you start working, you and your employer start contributing 12% of your basic salary (plus dearness allowances, if any) into your EPF account. The complete 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer. The remaining 8.33% goes from your employer’s side and is diverted to your Employee’s Pension Scheme. It is imperative to note that if your basic salary is above Rs. 6,500 per month, then your employer can only contribute 8.33% of 6,500 to your EPS and the balance amount gets credited to your EPF account. It is important to note that Contribution to provident fund is compulsory for the employees drawing up to Rs. 15,000 per month. Employees earning more than Rs. 15,000 per month can opt for the membership of provident fund.

Why is EPF useful?

This is useful because these funds are pooled together from many employees and invested by a trust. This pool generates an interest of 8% - 12%, as determined by the government and the central board of trustees. The current annual interest rate on the official EPF India website is 8.55% for the year 2017-18.

EPF is applicable for you each time you receive your pay. In case you are changing jobs, it is important you update your EPF information with your new company, by providing your EPF number so that your contribution is not hindered.

Interest on EPF

The compound interest that is determined by the government and central board of trustees is paid on the amount which is credited to the employee as on the 1st of April every year.

Even though your contributions are made monthly, the interest on your contributions are calculated yearly. At the beginning of every year, you’ll have an opening balance i.e. the amount accumulated till that point. Hence, your opening balance for the next year would be calculated as-

Opening balance + total monthly contributions + interest on the (old opening balance + contribution).

Please note that interest will only accumulate on your EPF balance and is not applicable on the funds that your EPS balance, as EPS is a pension scheme.

Tax Benefits Associated with EPF

There are a couple of benefits associated with EPF contribution, as your employer contribution to your EPF is tax-free. Your contribution is eligible for getting you a deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. The money that you accumulate in your EPF, the interest earned and the money that you will eventually withdraw after the mandatory specified period (5 years), all are exempt from Income Tax.

In case you don’t want to pay PF

Considering that you’ve already started your professional career, you have to choose whether or not you want EPF. Hence, the only time you can opt out of the EPF program is at the start of your career. You need to inform your first employer that you don’t want to be a part of this scheme and fill out Form 11. In case you have contributed towards EPF even once, and have a valid account in your name, you no longer are eligible to opt out of this scheme.

However, don’t fret. Even though opting out of the EPF scheme increases your in-hand salary, it is one of the most simple and hassle free mediums to build a retirement fund. For now, having a little less to spend can result in great financial stability in your later years. By pooling in the funds that you and your employer collect together, and the relatively high interest rates, you can build a strong corpus of funds without even realising it.

How do I find out how much I’ve saved?

EPF India is your go-to website to know all about your EPF details. Simply enter your UAN (Universal Account Number), and you can easily access all EPFO facilities online. Alternatively, you can check your EPF details with your EPF account number.

When can I withdraw the money that gets credited in my account?

Generally, you are not allowed to withdraw amounts from your EPF account, unless you are no longer working or wish to be self-employed, etc. As per the rules, you can withdraw money from this account only if you have no job at the time you apply for a withdrawal. The waiting period for the same is 2 months. In case you need to withdraw, you will have to fill a declaration with a specified reason for the same. You will also need to fill in Form 19, sign it and have it attested by your former employer. Next, you need to submit this form along with a letter stating that you are no longer employed by a company along with a cancelled cheque from your savings bank account to the EPFO of your jurisdiction.

In case you want your EPF immediately, there are a number of ways to make sure you navigate your way out of the 2 month waiting period. Employees who have landed a job abroad or plan to settle abroad can receive PF withdrawal immediately after registration. To do so, you’ll have to submit proofs such as a copy of your VISA or employment letter. Also, in case you are a female employee, you are eligible to withdraw your PF money if you are leaving service for the purpose of getting married. Alternatively, you can withdraw a portion of your EPF savings for:

Education or marriage of yourself, your siblings, or children partial withdrawal up to 50% is permissible if you have completed 7 years’ of service.
In case you need to pay for immediate medical expenses for yourself, spouse, children, or dependant parents.
Repaying housing loans for a house owned by you, a spouse, or jointly by both of you. You can do this only after 3 years (with effect from April 2017) of service and contribution to EPF.
Paying for the costs of alterations or repairs in your existing home. In such a case you will need to have been in service and contributing for 5 years for alterations and 10 for repairs.
In case you have completed 7 years of service, you can withdraw 50% of your EPF contribution up to 3 times in your working life.

Example of EPF Breakup

To understand this concept better, let’s consider a basic example:

Mr. Ajay starts working with a basic salary of Rs. 20,000, and gets a 5% increment in salary every year.

He has worked for 35 years i.e. starting at age 20, up to age 60 years. He has also diligently contributed 12% of his basic salary, which has equally been matched by his employer as 3.67% to EPF and 8.67% to EPS.

Hence, in last 35 working years, Ajay’s total contribution has been Rs. 26.01 lakhs whereas the company has contributed Rs. 7.95 lakhs. This makes the total contribution of up to Rs. 33.96 lakhs.

Based on the assumption that the rate of interest stays constant at 8.5%, this money will grow to become a total of almost Rs. 1.38 crore at the time of his retirement! Such an amount is sufficient for him to look after himself and his family in times of need.

Linking your Aadhaar card with EPF

Linking your Aadhaar card is an advantageous process and can be done by a few simple steps. Read on to know more-

By linking your Aadhaar card to your UAN, the entire process of getting the signature of your employer can be skipped for good.
In order to facilitate a smooth process, you must ensure that your Aadhaar card details and bank details are embedded in the EPFO’s member portal.
Similarly, your employer should have verified both - the Aadhaar card and the bank details.
As an employee, you need to ensure that your UAN has been activated before starting the process of making a withdrawal.
On meeting these conditions, simply download Form 19- UAN for making PF withdrawals or Form 10C- UAN in order to make withdrawals from one’s pension scheme.
Then enter your name, registered mobile number, address, PAN card number, and your reason for leaving and date of joining. You must ensure that the provided details match one’s Aadhaar card and bank details. Discrepancies could lead to a rejection of the application or a delay.
Also, you must attach a cancelled cheque to the form and submit it to the regional EPF office.

Withdrawal of EPF

The procedure could turn out to be a little bit of an inconvenience. But in case you have no other resort left, then follow the process mentioned below:

First, as an employee, you must download the Form 19, Form 31 or Form 10C from the EPFO’s member portal, depending on where the withdrawal is going to be made from.
Upon filling the same, the form has to be attested by an authorised signatory, such as a Gazetted officer, manager of a bank, magistrate, etc. Once done, the authorized signatory has to sign every page of the form.
Mention a reason for not getting the employer’s signature, state “Non-cooperation”.
Then, the employer will have to attach an indemnity bond with a 100 Rupee stamp paper, attach one’s payslips, employment ID, appointment letter and Form 19.
As a proof of address and identity, you need to submit your regular KYC documents along with the attested form, along with cancelled cheque and the other papers of verification at the regional EPF office.

EPF customer service

The EPFO now has a dedicated customer care service, for those who want to get their queries regarding their PF account clarified. These queries could be anything related to EPF- a delay in a claim being raised, discrepancies with regard to their contributions, or the inability to make a withdrawal. Also, if you are new to EPF, simply follow the steps mentioned below or reach out to EPFO’s customer care toll free number:

Log on to the EPFO’s member portal
On the top of the page, click on the ‘Contact Us’ button
Once you have done that, the EPFO’s customer care toll free number will be displayed based on the region the employer is located in.

Digital Signature for EPFO

In an attempt to make the process of transfer claims easier and transparent, EPFO has introduced the concept of digital signature for employers. Employers can now approve claims by using their digital signatures. In case the employee wants to shift organisations, his transfer claim has to be attested by either his previous employer or the present one. This is where digital signature of the employer comes into play. Back in the day, employees had to fill Form 13 and get it signed by their employers. Then, they had to submit it to the regional EPF office. However, now the process has been simplified and can be done on the EPFO’s member portal. To have a digital signature, employers have to apply for a digital certificate, which contains their personal details such as name, email ID, APNIC account name, public key and the country of the employer. The digital certificate is issued by the Certifying authority and the identification key contains their required details that will be embedded in the EPFO’s member portal.

EPFO grievance

In case an employee wants to register a grievance, the EPFO has a dedicated part of their member portal for them to fill in a grievance registration form and eventually file a complaint. Generally, employees might face grievances with regard to withdrawals, PF settlements, transfer of accounts or settlement of pension. Hence, if you are new to the EPFO’s member portal, you can simply follow the steps to register a grievance:

Visit the EPFO’s member portal - www.epfdelhi.gov.in/grievances.asp
At the end of the screen, click on ‘EPF grievance system’.
The page then redirects to the EPFO’s grievance management system. On this page, click on ‘Register grievance’ on the top bar.
Once done, the grievance registration form will be displayed.
- Now, fill in the registration form:
- Enter your status (Employer, employee, EPS pensioner)
- Enter your PF account number
- Enter where your regional EPF office is located
- Next, enter the name of your establishment and the address of your establishment
- After that, enter your name, address, pin code, country, phone number and email ID.
- The last part is to enter the grievance category - whether it is a transfer or withdrawal related issue, a pension settlement issue, etc. Select your grievance from the drop down bar.
- Upload your grievance letter, enter the captcha and submit your grievance registration.

Will an Idle EPF account earn interest?

The Government of India, as on April 1, 2011, has decided against adding interest to EPF accounts that have been inoperable for 36 months or more. This means that despite the fact that some employees had money on their PF accounts and these were inoperable, no interest was added to their funds. On November 11, 2016, the Government reversed their decision. Now, even inoperable EPF accounts will reap the benefits of having interest against it. Hence, as of 2017-2018, the interest added to EPF accounts was at 8.55% per annum. This is applicable to employees who have not withdrawn all their money from their PF accounts.

What is UAN?

UAN or Universal Account Number is a 12-digit unique number that has been given to every PF member. Before the concept of UAN was introduced, employees were inconvenienced by the fact that they had to keep shifting their accounts when they shift organisations. However, now UAN controls all PF accounts of an employee as it functions as one account. Some of the benefits of having a UAN are:

With UAN, employees can now make withdrawals from their PF accounts. Employees who have linked their Aadhaar card to their UAN no longer need to get an attestation from their employers to make a withdrawal.
PF accounts of an employee are unified and are now treated as one account under the UAN.
UAN assists in transferring money from one PF account to another PF account.
Employees can also track their accounts, check the contributions, balance of their account and can manage their PF accounts all by themselves with the help of their UAN.

Steps to check EPF balance

Earlier, EPF members could check their balance only once in a year to verify their contributions withdrawals and their outstanding balance. But with the introduction of the EPFO’s member portal and UAN, checking one’s EPF balance is simply a few clicks away. To check one’s EPF balance on the EPFO’s member portal, you need to follow the steps:

Visit the EPFO’s member portal - www.epfindia.com/site_en/KYEPFB.php
Next, click on ‘Know your balance’ at the bottom of the screen
Then, select the location of your regional EPF office
Enter your PF account number and your mobile number
Once you have done that, click on ‘submit’. In a few seconds you will receive a text message of your EPF balance

To check balance via UAN:

Visit the UAN webpage - uanmembers.epfoservices.in/
Enter your UAN and mobile number
Next, select your EPF state and city
Enter the captcha code and click on ‘submit’.
You will receive an SMS of your EPF balance

You can even check his/her balance via SMS, missed call or on the EPF mobile app.

Frequently Asked Questions

Q. What is EPF Helpline?
- Ans: For EPF members who need help navigating through the processes of the EPF or have specific queries that need to be resolved, the EPFO has set up a dedicated helpline to come to the aid of such members. The toll free helpline of the EPF is 1800118005.
Q. What is EPF E-Sewa?
- Ans: The EPFO launched the E-Sewa, in April 2012. E-Sewa is an online receipt of the Electronic Challan cum Return (ECR). Employers can enrol for this facility by registering their establishment code, unique ID and setting a secured password on the portal. This has made the entire process of returns paperless, as employers can now view the electronic challan on the portal, the annual account slips and can even print them, if required. Once they have made a return, an SMS will alert them of the same.
Q. Is EPF a way to save up for my retirement?
- Ans: Yes, EPF is an efficient and tax-free way to save up for your retirement.
Q. Can I transfer my EPF amount from one company to another?
- Ans: Yes, it is possible to transfer your EPF amount from one company to another. All you have to provide either your EPF account number or your 12-digit UAN number to your current employer.
Q. What is the benefit of linking your Aadhaar card to your UAN?
- Ans: As Aadhaar card has now become one of the most valid sources of identification, linking your Aadhaar card to your UAN allows to make withdrawals, transfers and so on without the attestation of their employers. The Aadhaar card details linked to the UAN serve as a valid verification of the EPF member as well, thereby enabling the member to perform various tasks related to the EPF in a hassle free manner.