Employee Provident Fund

The Employees’ Provident Fund Scheme came into effect in 1952, replacing the Employee Provident Fund Ordinance of 1951. The Employees’ Provident Fund and Miscellaneous Act of 1952 are managed by the Central Board of Trustees, which consists of representatives from the government, employers and employees. The Central Board of Trustees is aided by the EPFO, which is administered by the Ministry of Labour and Employment. EPF aims to expedite retirement savings for all employees in India. Employees’ Provident Fund is a collection of funds built through monthly contributions by an employee and an employer. More than five crore members are getting serviced by EPFO. Any organization with a minimum of 20 employees need to be registered with EPFO as mandated by the law. This act doesn’t apply to the state of Jammu and Kashmir.

The amount is contributed to EPF by a fixed rate. Member employees are eligible for the pension, provident fund and insurance benefits under this act as per these three schemes:

• Employees’ Provident Fund Scheme, 1952

• Employees’ Pension Scheme, 1955

• Employees’ Deposit Linked Insurance Scheme, 1976

There are several EPF forms that an employee consider to avail the benefits of provident fund.

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Taxation of EPF Contributions Proposed by Finance Minister

EPF, or Employee’s Provident Fund, was a tax-free investment so far, which served as a life-saver for many having no other retirement savings plans. However, as part of the current budget, the Finance Minister has proposed taxation on EPF after a certain yearly limit of contribution, which is said to be set at ₹2.5 lakh.

This reform, by its nature, is designed to tax only high-income employees. A ₹2.5 lakh contribution to EPF would mean the individual has an income of at least ₹20.83 lakh per annum. The government stresses that this is a limited-impact move that will only affect high-income groups. Employees with annual salary below ₹20 lakh will have nothing to worry about.

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Benefits of EPF Scheme

• EPF helps in saving tax as the EPF contribution is exempted from income tax under section 80C.

• EPF withdrawals at maturity or after five years attract zero tax (provided that premature withdrawal is not made), which helps in optimizing growth and returns on savings.

• As the fund is not easy to withdraw, it provides financial security at the time of retirement by ensuring savings throughout an individual’s active job life.

• The fund can also be used in emergencies at the time of sudden death, disability or for retrenchment period through premature withdrawal.

• EPF is a suitable option for employees who aim for long term investment goals.

• As per the EPF act, an employer also contributes to the pension fund, which the employee can use at the time of retirement.

• In EPF, the employer also contributes to the life insurance cover of employees.

• All EPF accounts can be merged and accessed by employees through a single window after the introduction of UAN (Universal Account Number) while shifting from one employer to another during a job change.

• EPF services are also available on the mobile app known as UMANG.

Withdrawing EPF Corpus After One-Month of Unemployment

Salaried employees who have Employees' Provident Fund (EPF) accounts can now withdraw up to 75% of their EPF corpus if they remain unemployed for a minimum of one month. Employees' Provident Fund Organisation (EPFO) had recently decided to allow EPF contributors to get an advance against their EPF corpus when they lose their jobs and remain unemployed for a minimum period of one month. This decision was taken by the Central Board of Trustees (CBT) of EPFO. However, a statutory notification is required for the request to get approved.

Earlier, the EPF rules asserted that withdrawal of the entire EPF corpus upon unemployment is allowed only if the individual remains unemployed for a minimum period of 2 months. The full withdrawal of EPF corpus meant closing the EPF account. Thus, to ensure that EPF subscribers don't close their accounts while they're unemployed and still have access to their funds, the EPFO has resolved to let EPFO members who have remained unemployed for at least a month withdraw up to 75% of their complete EPF corpus.

For total withdrawal of EPF corpus, you'll have to fill and submit Form 19. For withdrawing pension amount from the Employees' Pension Scheme (EPS), you'll be required to fill and submit Form 10C. Furthermore, for partial withdrawal of ELS, for medical treatments, children's education, wedding expenditure, you'll have to fill and submit Form 31.

The Composite Form has consolidated all the forms mentioned above into one that has been categorized into Non-Aadhaar and Aadhaar categories.

• The Aadhaar-based composite form is for people who have linked their Aadhaar, PAN, and bank account with UAN. These individuals can submit their withdrawal claim online by using the Aadhaar Composite Form. Since EPFO has the individual's KYC and EPF Account information, the employer’s intervention isn't necessary. If the details don't match, only then an individual is required to reach out to his/her employer.

• The Non-Aadhaar composite form is for those individuals who have not linked their Aadhaar to their UAN. This form should be signed and attested by the employer and must be submitted to the nearest EPF office by the employer. The claim settlement it takes up to two weeks to be processed.

According to the new provision under the Employees’ Provident Fund Scheme of 1952, a salaried individual who have contributed to the EPF can avail an advance of up to 75% of the EPF corpus if they remain unemployed for at least a month. The remaining 25% of the EPF corpus can be withdrawn after two months of unemployment. This provision could prove to be beneficial to more than 5 crores EPFO members since it inhibits premature closure of EPF accounts. The purpose of the EPF scheme is to give social security to salaried employees after retirement. The new provision will allow EPFO members to enjoy fast withdrawal of money while keeping the EPF accounts active after unemployment.

EPF Deductions

An employee provident fund is made up of contributions from the employee and the employer at a fixed rate. For an employee, minimum contribution is set at 12% of his/her basic pay + dearness allowance.

An employer contribution is also set at 12% of minimum basic pay (which is, 12% of 15000). However; it gets divided between EPF (3.67%) and Employee's pension fund scheme (8.33%). Earlier, EPF contribution was at 12% of 6500.

So, it can be understood as the employer’s contribution to EPF is 12% of salary (basic + DA) contribution = 8.33% to EPS + 3.67% to EPF. Along with this, the employer also contributes at 0.5 % to EDLI administration cost, 1.1% to EPF and 0.01% to EDLI administration cost which makes the total employer contribution at 13.61%.

EPF Interest Rate

The interest rate for EPF was 8.8% in 2015-2016, which has been changed to 8.65% in 2017-2018. Every year, the EPF interest rates get altered by the central government in assistance with Central Board of Trustees, who regulates the act in association with EPFO. The new norms remain applicable for the whole financial year (from April 1st to March 31st ) in which it has been announced. Interest is calculated, but it gets credited by the end of the financial year. The credited interest will get added to the balance in April. Interest will not get credited on withdrawn amounts or the amount directed towards EPS (Employment Pension Scheme) by the employer.

Calculation of EPF Balance

Consider as an example for the fiscal year 2018 - 2019 in which the EPF deposit rate was 8.75% per annum. Assume that the employee started contributions in December.

• First, calculate the interest rate per month: To estimate the interest rate applicable each month, you’ll need to divide the annual interest rate by 12. Here, the monthly interest rate (interest rate per month) is, 8.75 / 12 = 0.73%

• Next, remember that the employee's entire contribution will be directed toward his/her EPF account.

• Let's consider that he/she contributes at 12% of Rs.15,000 = Rs.1,800 per month; which is credited to EPF account at the end of the month when he/she receives his/her salary.

• So in this case, December's contribution will earn interest only by the end of January.

• The employer will match this contribution = Rs.1,800. However, remember that only 3.67% of the employer's contribution will be directed towards the employee's EPF account and the balance of 8.33% will be directed towards the employee's EPS account. Therefore, the employer's contribution to the employees EPF account = Rs. 3.67% * Rs.15,000 = Rs.550

In this case, monthly contribution to EPF account by the employee and employer = Rs.1,800 + Rs.550 = Rs.2,350.

Dec 2018	Balance at end of Dec. = Rs.2,350
	Interest for Dec. 2018 = Nil
Jan 2019	Balance carried forward from Dec. = Rs.2,350
	Balance at end of Jan = Rs.2,350 + Rs.2,350 = Rs. 4700
	Interest for Jan. 2018 = Rs.4,700 * 0.73% = Rs.34.31
Feb. 2019	Balance carried forward from Jan. = Rs.4,700
	Balance at end of Jan = Rs.4,700 + Rs.2,350 = Rs.7,050
	Interest for Feb. 2018 = Rs.7,050 * 0.73% = Rs.51.46
March. 2019	Balance carried forward from Feb. = Rs.7,050
	Balance at end of March = Rs.7,050 + Rs.2,350 = Rs.9,400
	Interest for Mar. 2018 = Rs.9,400 * 0.73% = Rs.68.62

This continues till the end of March 2020 when interest earned for the year is added up and credited again.

How to Transfer EPF Offline

• To transfer EPF account balance from the past employer to present employer, the employee has to fill and submit a duly attested copy of Form 13 to his/her previous or current employer. Either the past or present employer can attest the form.

• As mentioned above, under the section ‘Form-13’, the form should be submitted to the regional EPF office. PF contributions from the old EPF account is usually transferred to a Trust.

• The old employer can submit Annexure K to the relevant Regional Provident Fund Commissioner (RPFC) or the Regional EPF office. Annexure K indicates that the employee’s service tenure and the pension fund account are balanced. After Annexure K has been verified, the PF trust completes the transfer process through NEFT. Balance from the old EPF account is credited to the employee’s new account after the annexure is verified.

• In many cases, people forget to submit Annexure K which means the Trust can't credit money to the new EPF account. There's no way to track this discrepancy which led to stalling of a large number of transfer cases. For this reason, Claim Forms and Annexure K were digitized to facilitate the online transfer of EPF. 

Let's learn how EPF can be transferred online.

How to Transfer EPF Online

• To transfer EPF account balances from earlier employers to present employers online, the employee must visit the official EPFO website

• First, you need to verify that the previous and current employers have registered their digital signatures with the EPFO. If they don’t have digital signatures, you should follow offline PF transfer method.

• In the EPFO portal’s home page, select the option 'Online Transfer Claim Portal (OTCP)'

• In the next step, choose the option to check eligibility for transferring the claim online

• For checking the eligibility for OCTP,  give your prior PF details (your old and new PF account numbers)

• If you're registered with the website, you can log in with the Member ID. If you are not registered, you should get the log-in details first.

• Once you log in, you'll be redirected to the 'Online Transfer Claim Application.'

• Request for 'Account Transfer' under the ‘Claim’ option in the menu.

• 'Request for Transfer of Account Form' will be displayed on the screen. Fill out Part A, Part B and Part C of Form 13.

  • Part A requires you to fill in personal details, such as name, phone number, email ID, bank account number and IFSC of your bank account.

  • Part B requires you to fill in details of your old PF account such as the old PF account number and EPF office. Now you can proceed to acquire the following details:

    • • Employee’s old establishment address and name

      • Employee’s name

      • Date of birth

      • Joining and exit date

      • Father’s/spouse’s name

      • Address of the EPF office

  • Part C is very similar to Part B, except this concerns with the current PF account information

• Get the form/claim attested by the current or old employer.

• In the next step, preview the form after it is complete and make the necessary modifications.

• Get the PIN and accept the declaration. Finally, enter the PIN to submit the online claim/form for transferring your PF account funds.

• Print the filled out form, sign and then submit it to the current employer for attestation. The current employer can validate the form on the portal. After the form has been verified, the EPFO will proceed to transfer the PF account.

• You can express the issues on the portal through the Grievance System.

• Your eligibility for online transfers can be checked on the same portal by giving the old and new PF account information. Your EPF transfer claim status can also be tracked online through the portal.

Automatic Transfer of EPF on Job Change

The Employees' Provident Fund Organization (EPFO) offers a retirement savings scheme for employees of the private sector. The Employees' Provident Fund (EPF) scheme grants social security to employees post-retirement. The employer and employee are required to contribute 12% of the employee’s basic salary to their EPF accounts. Post-retirement, the employee can get a lump-sum amount with their pension and interest amount.

Employees who have contributed to EPF for at least ten years are eligible for a pension. Therefore, it is desirable to transfer funds from your old EPF account to the new EPF account instead of closing it completely. Employees can receive a 12-digit Universal Account Number (UAN) which is designated by the EPFO to their EPF members.

While changing jobs, employees must decide whether they wish to transfer their EPF account to the new employer or close it. EPFO allows members to transfer EPF accounts upon job change automatically. The process of automatic EPF transfer is described below:

• After joining the new company, fill out the 'Composite Declaration Form'. The form should be filled with personal details and the details of Universal Account Number.

• If the UAN is associated with the employee's Aadhaar and verified by the previous employer, then the employee will be receiving a message regarding the PF auto-transfer on his/her new registered mobile number.

• If an employee wishes to stop the auto-transfer, then he/she must make the request as soon as possible.

• The auto-transfer procedure is initiated only after the new employer executes the first contribution deposit for the new EPF account.

• If the former company doesn't verify an employee's UAN, then he/she must apply for the EPF transfer through offline mode.

• The transfer of EPF accounts has become simple and hassle-free with the advent of digitization. An EPF member/employee needs to furnish a few basic details and the UAN to the new employer, and the new employer will be required to update the details presented on the EPFO portal. This can initiate the automatic transfer of the PF funds from the old to new EPF account.

EPF Passbook

PF subscribers can monitor their EPF balance and account status updates through their EPF passbooks. An EPF passbook records transactions made in the PF accounts. The employees' PF status and account updates are shown in this passbook on a monthly basis.

Earlier, employers would offer employees with a yearly statement reporting the contributions made by every party and the interest earned. This statement is sent to the employer by the associated EPFO office at the end of the financial year.

To avail the EPF e-passbook facility, members will need to register on the EPF members portal. This facility is available to employees to people who have already uploaded the ECR (Electronic Challan cum Receipt) and for whom the employer has remitted all the current dues. Additionally, this facility doesn't apply to employees whose accounts are inactive or have already been settled. However, employees can request EPF passbooks of inactive accounts by making a request for the same through the online portal.

After the employee is registered with the member portal, subscribers can download their e-passbooks by giving details such as the address of the PF office, company code, PF account number and the subscriber's name. After you have provided all the details, the authentication PIN can be generated through the ‘Get PIN’ icon. After receiving the PIN, you can enter the same at the designated box in the bottom of the page after agreeing to the disclaimer.

Criteria to Withdraw Funds from the EPF Corpus

Almost all salaried employees contribute towards EPF in India. While the accumulated EPF amount is usually withdrawn at the time of retirement, there are several other factors which qualify for premature withdrawals. You can refer to the table below for premature withdrawal criteria and the maximum amount that you can withdraw.

EPF Correction

For making changes to personal details like name, birth-date and husband/spouse's name, employees can begin the procedure through their employers by using the correction form which needs to be submitted/declared jointly between the employee and the employer.