The Employees’ Provident Fund (EPF) Scheme
The EPF scheme’s aim is to build a retirement savings for employees across India. The Employees’ Provident Fund (EPF) is a corpus built by an employee and his/her employer together through regular, monthly contributions.
As the Employee Provident fund Organization (EPFO) services a large number of subscribers and with this, involved in a large number of associated transactions, the EPFO ranks among the largest organizations, globally. EPFO services approximately 5 crore members. Under the EPF Act, the EPFO operates three schemes as mentioned below.
- Employees’ Provident Fund Scheme
- Employees’ Pension Scheme (EPS)
- Employees’ Deposit Linked Insurance Scheme (EDLI)
Under the EPF Act, the employees are eligible for the provident fund, pension fund and insurance benefits under the above mentioned schemes.
Features and benefits of the Employee Provident Fund Scheme
- The interest earned from funds held in the EPF account is fully exempted from tax. Withdrawals at maturity or after completion of 5 years are also completely tax free
- The Contributions made by an employee towards the EPF fund are tax deductible under 80C
- Amount accumulated provides financial security during retirement
- During emergencies like medical treatment, financial issues, premature withdrawal of the EPF funds are allowed
- An employee can withdraw the accumulated amount in the EPF account 2 months after resignation
- The accumulated amount is passed on to the employee’s nominee to provide financial stability after 2 months when the employee is declared legally dead
- EPF balances can be withdrawn, if the employee is not in a position to work any longer
- The employer also contributes towards employee’s pension fund(EPS) along with provident fund, which can be used by the employee upon retirement
Eligibility for EPF Membership
- Employees are eligible for EPF membership from the date of joining a company. This includes them becoming eligible for provident fund, insurance and pension. It is mandatory that companies with more than 20 employees should provide EPF to their employees.
An EPF(employee’s provident fund) account is made up of the following
- Contributions made by the employee and the employer
- On a monthly basis at a fixed rate (percentage of salary = basic + DA)
Currently, the mandatory contributions are made at 12% of Basic + DA, but it is not mandatory when:
- The number of employees in a company is less than 20
- Sick industries
- Beedi, jute, brick, guar gum and coir industries
Employee’s & Employer’s Contribution
The minimum employee and employer contribution is now 12% of Basic + DA each
For example, if the Salary (basic+DA) of an employee is Rs.15000 then the
The Employee’s contribution is Rs. 1800 (12% of Rs.15000)
*entire employee contribution is deposited in the provident fund but the percentage of contributions are different in case of employer’s contribution
The Employer’s contribution is Rs.1800 (12% of Rs.15000)
This is then split to 8.33% to EPS and 3.67% to EPF i.e., Rs. 1249.5 into EPS & Rs. 550.5 into EPF
Additionally, 0.85% to EPF administration costs, 0.5% to EDLI (Employee Deposit linked insurance) and 0.01% to EDLI administration costs.
EPF Interest Rate
The latest declared EPF interest rate is 8.8% p.a. EPF account balances earn interest and the earned interest is entirely tax-free.
Checking EPF Balance Online
If you have the EPF number, the balance can be checked at the webpage. The input screen would look like the below picture.
EPF Withdrawal or Transfer Claims
The members can simply transfer their account in case of switching companies. The members can register their transfer and withdrawal claims, both by visiting the relevant EPFO and filling forms or through EPFO website. If the members had updated their mobile numbers they will be receiving updates on their EPF withdrawal claims approval/rejection status.
Alternatively, claim status can be obtained by the applicants by contacting the respective EPFO through its helpline or customer care numbers.