What is EPF?
EPF or Employees’ Provident Fund is an investment fund maintained by the Employees’ Provident Fund Organisation of India (EPFO). It is a popular choice when it comes to investment among salaried people. It is mandatory for any company employing at least 20 employees to register with the EPFO and make EPF available to its employees.
What is Employer (EPF) Contribution?
At present, according to the EPF regulations, all employers are required to contribute 12 percent of the employee’s basic salary (and DA if basic salary is less that INR 15000) towards EPF. Similarly, the employee contributes 12 percent of the basic pay as EPF contribution. 8.33 percent of the employee’s contribution goes towards pension, 0.5 percent towards EDLI or Employees Deposit Linked Insurance.
Is contribution to the EPF mandatory?
In the 2015 Budget speech Finance Minister, Arun Jaitley declared that EPF contributions made by employees who draw salary below a threshold would be made optional without affecting the employer’s contribution. This threshold is yet to be clarified by the government, though. While it may not be compulsory, EPF is an excellent investment option both in terms of security and returns and it is strongly recommended that all salaried workers claim its benefits by contributing to it.
Can PF be transferred or withdrawn?
In case of change in employment, EPF account can be transferred from one employer to another. The government has now introduced a UAN (Universal Account Number), a unique account number that facilitates quick and easy transfer of PF accounts. This means that with the transfer of the account using the UAN, the new employer accepts responsibility for contributing to the EPF account of the employee. When an employee leaves work and does not intent to work for the next 6 months, the entire PF amount can be withdrawn.
What are the tax benefits of contributing to the EPF account?
Provident fund contributions made by both the employer and the employee are not considered taxable income for Income Tax purposes. This is of great benefit to the employee as it is a non-taxable income, safely invested towards the pension fund and as a lump sum income received during superannuation.
Is EPF transfer or withdrawal taxable?
Under the existing EPF & MP Act guidelines, any income received through a withdrawal of the Employee Provident Fund shall be deemed taxable in case such a withdrawal is made by the employee before five years of continuous service. Exemptions are provided in case the termination of employment occurs due to ill health or due to closure of business. Income tax is however not applicable on the accumulated EPF balance transferred to a new employer as it is a continuation of the account.
Does the employee receive an interest on accumulated EPF Account balance?
The EPFO (funded by the government of India) pays out compound interest on all the deposits made into any employee’s provident fund account. The interest rate on the EPF account varies each year. It is determined by the Finance Ministry. The interest rate paid on accumulated EPF for the financial year 2014-15 is 8.75 percent. It is likely that for the current fiscal year, the interest rates provided on EPF deposits may be slightly higher than that of the previous fiscal year.
Can an employee contribute more than the employer into the EPF?
The EPF is an excellent investment option and a social security scheme for most employees and salaried workers of India. This means that the EPFO provides employees the facility to voluntarily increase their contributions to their EPF accounts to even 100 percent of their basic + da (if applicable). Such an increase in contribution is entirely dependent on the employee’s convenience. The employer, however, may not contribute more than 12 percent. Employer’s contribution remains unchanged despite a voluntary hike in the employee’s contribution towards EPF.
EPF Withdrawal Made Simple
As of December 2015, the EPFO has introduced a new simplified process for EPF withdrawal making the process extremely employee friendly.
• Form 19 UAN – If the subscriber remains unemployed for over 2 months, the Employee Provident Fund amount accumulated in his/her account may be withdrawn using the Form 19 UAN.
• Form 10-C UAN – This form makes withdrawal from EPS account easy and hassle-free. The EPS account is the pension account linked to the EPF account.
• Form 31 UAN – This new form facilitates a partial withdrawal of the EPF amount. It may be used to buy property, medical treatment, or for marriage.
How is this Better?
The old manual process of EPF withdrawal required the employer’s verification and attestation. This made employees prone to harassment and was unduly cumbersome. The new process is tech-friendly and hassle-free.
How Can You Use the New Withdrawal Process?
To use the new EPF withdrawal process, you will need to –
• Link your Universal Account Number (UAN) with your Aadhar card number
• Register your bank account number and KYC details with the EPF website
• These details must be digitally verified by the employer
Step-by-step EPF Withdrawal Process
• Log on to the EPF website and activate your UAN based registration
• Update your KYC information
• Ensure KYC is verified (can be checked through Profile > Update KYC Information)
• Once the UAN is activated and KYC verified, fill in the relevant EPF withdrawal form
• What You Will Need to Provide –
o Your UAN
o Mobile Number
o Postal Address & PAN
o Date of leaving service (and reason)
• Print the form
• Attach a cancelled cheque (of the account mentioned in your KYC details)
• Post the form and cheque to the regional EPF office under whose jurisdiction your account has been created.
EPF Transfer Process
Provide your new employer your UAN to be included in their employees list.