The Employees’ Provident fund (EPF) is a government-run retirement savings scheme in India. The Employees’ provident fund (EPF) is managed by Employees Provident Fund Organisation (EPFO). Its goal is to give employees long-term security. The EPF is discussed in this article, which includes its various benefits, eligibility requirements, contribution standards, etc.
The Employees Provident fund
Employees’ Provident fund was created under Employees’ Provident and Miscellaneous Provisions Act 1952. The Employees’ Provident Fund is mandatory for workers, particularly those in organized sectors. This scheme is designed to encourage employees to save part of their salary each month. These savings can then be used for retirement, or other situations.
EPF Features
- Participation is mandatory The EPF is compulsory for all employers with more than 20 employees.
- Contribution Rate The EPF is funded by both the employer and the employee. Both contribute 12 % of an employee’s salary or dearness allowance.
- ROI (Return on Investment) EPF offers an annual fixed rate of return, which is determined by the government. The interest rate is 8.1% as of fiscal year 2022-2023.
- Tax Benefits: Section 80C (Income Tax Act of 1961) allows for the deduction of EPF contributions.
- Partially Withdrawal: The EPF can be withdrawn by employees for specific purposes such as marriage, education or home loan repayment.
- Pension Scheme Employee Pension System (EPS): A part of the contribution from the employer is directed to the Employee Pension Plan. The Employee Pension Program provides a pension upon retirement for the employees.
The EPF Eligibility Criteria
- Employees must be in an organisation with more than 20 employees.
- Organizations with fewer than 20 workers can opt out of the program, but employers may initiate it voluntarily.
- Employees drawing up to ₹15,000 as monthly wages at the time of joining are required to become members of the EPF.
Contribution Details
Here is a breakdown of the EPF contributions rates:
- Employee Contribution Salary Basic + Dearness (DA) = 12%
- Employer Contribution This is 12% of the Basic Salary plus DA.
- The EPF is credited with 3.67%
- Employee Pension System (EPS): 8.33%
- Employers contribute 0.5% of the employee deposit linked insurance scheme (EDLI), and an additional 1.1% administrative charge.
Example Illustration
Consider an employee with a basic salary of ₹10,000 and DA of ₹2,000:
- Contribution to the EPF: 12% of ₹12,000 = ₹1,440 (both employer and employee contributions)
- Employee’s contribution: ₹1,440 per month
- Employer’s contribution: ₹1,440 per month, further divided as:
- ₹440 towards EPF account
- ₹960 towards EPS account
There are several options and rules for withdrawal.
In certain circumstances, employees can withdraw the balance of their EPF:
- Retirement: The age limit for full withdrawal is 58.
- The partial withdrawal of funds: For specific reasons such as marriage, education or higher, purchase of a home, construction, and emergencies.
- Resignation: The employee can take the full balance of their salary if he or she is unemployed after quitting work for two months.
Online Services
EPFO services are now largely digitalized, making it much easier for workers to maintain their EPF accounts. Online services that are important include:
- UAN Members Portal Employees who change jobs can access the EPFO Universal Account number (UAN portal) to view their EPF balance and update any information.
- App: UMANG is a mobile app that allows EPFO to provide services such as checking balances, status of claims, etc.
- The EPF Passbook The EPFO website allows employees to download their EPF Passbook in order to track contributions made and accrued interest.
Challenges and reforms
The EPF has been challenged despite its many benefits:
- Administrative Delays The process of updating and processing claims has been slow and prone to errors.
- Inadequate Awareness Employees are not aware of their benefits, the withdrawal procedures and how to access services.
EPFO reforms have been implemented in the last few years to tackle these problems:
- Digitization: Digitalization of services is widespread to improve efficiency and convenience.
- Aadhaar linking: The mandatory linking of Aadhaar to UAN will streamline the processes and reduce fraud.
- Grievance Redressal Enhanced mechanisms that address complaints and efficiently resolve disputes.
FAQs (Frequently Asked Question)
1. What is Universal Account Number?
It is an unique 12-digit code assigned to each employee who contributes to the EPF. This number acts as an umbrella to multiple Member Identification numbers (MemberIDs) assigned by employers. UAN facilitates the management of EPF account, including transfers and withdrawals.
2. What is the EPF balance and how can I find it?
Check your EPF balance using the following methods
- UAN Members Portal You can view your UAN passbook when you log in.
- App UMANG: Download the UMANG App and sign up to gain access to EPFO Services.
- SMS: You can send an SMS with the text “EPFOHO UAN” from any registered mobile phone number.
- The call was not received: Send a missed phone call from your registered number to 011-22901406.
3. What if I retire before my EPF is fully credited?
You can withdraw a portion of your money for certain reasons, including marriage, schooling, emergencies medical, buying a home, and others. A full withdrawal can be made upon retirement, or after you have been unemployed more than 2 months.
4. When I switch jobs, what happens to my EPF?
Your UAN will remain the same when you switch jobs. However, your new employer may assign a Member ID (Member Identification Number). The UAN portal allows you to transfer the EPF balance between the old and new account.
5. Does EPF contribution have to be paid by contractual workers?
Even contractual workers must pay EPF contributions if an establishment has 20 employees or more. The employer as well as the employee are both required to adhere to contribution standards.
6. How does the EPF interest rate work?
EPF is calculated on a monthly running balance. Your EPF account is credited at the end each year. Interest rates are set by the government, and they can change each year.
7. What are the steps to update personal information in my EPF account?
You must log into the UAN Member Portal in order to make changes to your details, such as your name, birth date, and contact information. Depending on your situation, you may need to provide documents that are relevant for verification.
8. Can the EPF be used to claim tax credits?
Section 80C (Income Tax Act of 1961) allows for the deduction of EPF contributions. The maximum deduction under Section 80C is ₹1.5 lakh per year, which includes EPF contributions.
9. What is Employee Pension Scheme?
Employee Pension Schemes (EPS) are social security schemes that provide pensions to retirees. An amount of 8.33 % from the contribution made by the employer to EPF goes to the EPS. For employees to qualify for the pension they must work at least ten years.
10. If I move out of India, what happens to my EPF?
If you are a resident of India but have relocated outside the country, you may still be able to withdraw the EPF amount by submitting all the documents required at the EPFO Regional Office or through your previous employer. For smooth processing, ensure that your KYC information such as PAN, Aadhaar and your bank account details are up-to-date in your EPF.
