The Definitive Guide to the Basics of EPF (Employees Provident Fund)

The Employees’ Provident Fund, or EPF, is a popular savings scheme established by the Employees Provident Fund Organisation and monitored by the Government of India. The savings scheme is aimed at the salaried class to encourage them to save money to build a substantial retirement corpus.

Did you know that after one month of unemployment, only 75% of the corpus can be withdrawn, according to the new rules? After gaining employment, the remainder will be transferred to a new EPF account. 

The Basis of EPF

The savings scheme, also known as the Employee Provident Fund scheme, was established in 1952 under the Employee’s Provident Fund and Miscellaneous Act. The scheme is run by this act, the Employees’ Deposit Linked Insurance Scheme Act (1976), and the Employees’ Pension Scheme Act (1976). (1995).     

 The EPF does not consist of a single plan. It consists of three distinct schemes with three distinct goals. 

• The first section of the Employee Provident Fund is where you save for retirement. This is the scheme’s wealth generation component. 

• The second section of the ESP or the Employee Pension Scheme is the second component. The EPS aims to generate pensions for employees after the age of 58.

• The Employee Deposit Linked Insurance Scheme, or EDLI, is the third and final component of EPF. It is a life insurance policy. 

The advantage of this scheme is that you do not need to register for all of these benefits separately. When you sign up for EPF, you are automatically signed up for EPS and EDLI. 

Also Read: Everything You Need to Know About the Payroll Process

EPF Contribution

Employers contribute 12% of an employee’s salary to their EPF account. The maximum salary limit for calculating the employer’s contribution is ₹15,000. 

The employee contributes 12% of his earnings to his EPF account. This is deducted from his salary. However, the employee has the option of contributing more to his EPF account at his discretion. According to the law, there is no such limit on employee contributions to EPF. Contributions above the mandated 12% are directed to the Voluntary Provident Fund (VPF). Contributions to a VPF earn tax-free interest income. 

Current EPF Interest Rate 2022-23

The current EPF interest rate stands at 8.10%. This interest rate is valid for all the transactions made from 1st April 2022 to 31st March 2023.

EPF Interest Rate for the Last 20 Years

The following table will give you an idea of the diversity or stability of EPF interest rates over the years:  

Rules for EPF Withdrawal

The amount in the PF account can be withdrawn in full or in part, subject to certain terms and conditions. To withdraw the entire amount, the individual must be either retired or unemployed for more than two months. Only in these circumstances can the entire amount be withdrawn pending attestation from a gazetted office.

Individuals are eligible to withdraw their provident fund under certain conditions. They can withdraw money in the event of their children’s marriages, for their higher education, to repay home loans, in case of medical emergencies, for home renovation, purchase or construction of a house, to purchase land, and at a certain age before retirement, according to EPFO. 

Also Read: How to Download Form 26as From The Traces Website?

Eligibility Criteria to Withdraw EPF

It is imperative to bring to your notice that withdrawing from an EPF before five years of continuous service is taxable. If you withdraw your EPF after 5 years of continuous service, the amount you receive (principal and interest) is tax-free. However, withdrawals made before the fifth year are tax-free in the following circumstances

Employees’ Illness

Withdrawals made due to the employee’s illness or the employer’s discontinuance of business. Withdrawals made for reasons beyond the employer’s control are also tax-free.

Advance EPF

Income tax is not levied on any advances made under the EPF Scheme. TDS is not levied in withdrawal cases where the amount is less than ₹50,000 or the employer is closing down the business.

Amount Exceeds

If the amount exceeds ₹50,000 and the period of service is less than five years, the subscriber can submit Form 15G/15H to avoid TDS if the income for that year is less than the taxable limit. 

How to Withdraw PF Partially?

It should be noted that EPFO allows partial withdrawals from members’ accounts to meet financial emergencies resulting from the Covid-19 crisis. Members can withdraw up to three months’ basic and dearness allowance (DA) or 75% of the account’s credit balance, whichever is less. EPFO allows 90% withdrawal one year before retirement.

If an employee is laid off or retrenchment occurs before retirement, the EPF corpus can be withdrawn.

Also Read: Step-Wise Guide To Payroll Processing

Steps to Withdraw PF online

If you want to withdraw your PF online there are a few rules that you need to follow. Like providing certain documents and performing certain activities. Read the following points for a detailed breakdown of the steps.

• It is mandatory to activate the Universal Account Number and make sure it is linked to your registered mobile number. The UAN number also needs to be linked with KYC, Aadhar and IFSC Code. 

• Log into the UAN Portal with your Username and Password.

• Click on Online Services, then open the drop-down menu. Click on the ‘Claim’ tab.

• This will take you to a new page with all of the member information, KYC information, and so on. Fill in your bank account information and click ‘Verify.’ Then you must explain why you are leaving PF services. 

• A pop-up box titled ‘Certificate of Undertaking’ will appear. Click Yes.

• Return to the drop-down menu and select the ‘I Want to Apply For’ option, then the ‘Only PF withdrawal (Form 19)’ option.

• Fill out the ‘Complete Address’ field and attach scanned copies of your passbook or cheque.

• Tick the disclaimer box and then click the ‘Get Aadhaar OTP’ button. Fill in the OTP that was sent to your registered and linked mobile number. Submit the application after that. 

• After submitting this form, repeat the process and submit ‘Form 10C’ through the portal. Within 15 to 20 days, the requested amount should be deposited into your registered bank account. 

Also Read: How to Change Name in EPF Account – Download PF Correction Form

EPF Login Account

Once the claim has been submitted, the claim status can be tracked in the Member E-Sewa Portal account. This can be found under the ‘Track Claim Status’ tab. The application will be verified by the EPF and once verification is done the claim will be processed and sent to the account.  

Documents for EPF Withdrawal

When applying for PF withdrawal, the following documents are required. Make sure you have all of these to successfully withdraw your EPF:

• Composite Claim Form

• Two revenue stamps

• Statement of bank account (The bank account should only be in the name of the PF holder while he or she is alive).

• Identity verification

• Address verification

• One blank and cancelled cheque with the IFSC code and account number visible

• Personal information such as the father’s name, date of birth, and so on should match the identity proof exactly.

Conclusion

An employee provident fund is a long-term investment. EPF funds aim to build up an individual’s pension so that they remain financially secure even after retirement. In case of the death of the account holder, the entire amount will be handed over to the family. It is irrational to withdraw it for insignificant reasons. Withdrawal should be done only if other sources of income are not workable. The present interest rate on EPF is 8.1%, which is better than what is being offered on fixed deposits and others. There are tax benefits that can be accrued. EPF is a government scheme and hence is safe and secure. To buy a home, you can borrow up to 36 times your last monthly contribution. You can borrow up to 24 times your last monthly contribution when purchasing land.  

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