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Employee Provident Fund (EPF)

The Employee Provident Fund, often abbreviated as EPF, is a vital pillar of financial security for millions of employees across the globe. This government-mandated retirement savings scheme is designed to ensure that working individuals can build a financial cushion to support them during their post-retirement years.

What is Employee Provident Fund (EPF)?

EPF or Employee Provident Fund is a retirement savings scheme managed by the Employees’ Provident Fund Organisation (EPFO) in India. It is an important social security program for salaried employees working in the organized sector in India.

The EPF program is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, of 1952. Under EPF, a fixed percentage of the basic salary and dearness allowance (if applicable) of an employee is contributed every month by the employer. There is also a matching contribution made by the employee towards PF.

This contribution every month goes into the employee’s PF account. This account earns a fixed rate of interest annually as declared by the Government of India. The employee can withdraw the accumulated corpus in their Employee Provident Fund account on retirement or for specified expenses like housing, education etc. subject to certain conditions.

The EPF contribution made by the employer is 12% of the employee’s basic salary. Out of this, 8.33% goes to the Employees’ Pension Scheme (EPS) while the balance 3.67% is invested. The employee also contributes 12% of their basic salary + DA into their EPF account.

The employer is responsible for enrolling eligible employees under EPF, ensuring timely deposits of contributions, maintaining records and filing regular returns with the EPFO. The EPFO allots a Universal Account Number (UAN) to each member which is used to track their EPF account.

10 Benefits of Employees Provident Fund

The EPF account offers numerous benefits to salaried employees in India. Here are the top 10 benefits of having an EPF account:

  1. Retirement corpus: The main benefit of the Employee Provident Fund is that it builds a retirement corpus for the employee. The contributions over decades and accrued interest help create a sizable retirement fund.
  2. Financial security: EPF provides financial security and stability during old age when income stops after retirement.
  3. Interest earnings: EPF accounts earn a guaranteed interest rate declared by the government every year. For FY 2022-23, the EPF interest rate is 8.1%.
  4. Tax-free earnings: The interest accrued on the Employee Provident Fund account is completely tax-free. This increases the savings amount.
  5. Power of compounding: The accrued interest also starts earning interest thanks to the power of compounding, boosting the final corpus.
  6. Liquidity: Employees can take advances or withdrawals from their EPF account for specific needs like housing, education, marriage etc.
  7. Portable account: Employees can transfer their EPF account easily when changing jobs. The account is linked to the UAN.
  8. Pension under EPS: EPF subscription allows access to pension under the Employees’ Pension Scheme (EPS).
  9. Lifelong pension: EPS provides a regular pension after retirement for life giving income stability.
  10. Nomination facility: The Employee Provident Fund account has a provision for nomination which helps the family get a PF balance easily in case of untimely death.

Eligibility Criteria for EPF

The Employees’ Provident Fund Organization (EPFO) has laid down the eligibility criteria for employees and organizations to avail the benefits of EPF.

Eligibility for Employees

  • The employee should be working in the organized sector. This includes factories, establishments, companies, shops etc.
  • The monthly basic salary + dearness allowance (if applicable) should be less than Rs 15,000.
  • All employees under the age of 58 are eligible for EPF.
  • For an employee earning above Rs 15,000, the EPF is not mandatory but they can become a voluntary member.

Eligibility for Employers

  • The company/establishment should have over 20 employees to be eligible for Employee Provident Fund registration.
  • Once the company exceeds 20 employees, it must register with EPFO within one month.
  • For companies with less than 20 employees, EPF registration is voluntary.

Thus, the Employee Provident Fund becomes mandatory for companies exceeding 20 employees and paying up to Rs 15,000 basic salary. Employees earning above this threshold can voluntarily participate. Both employers and employees must fulfil the eligibility norms to avail EPF benefits.

Types of Provident Funds (PFs)

There are various types of provident fund schemes in India. The main ones are:

Employees’ Provident Fund (EPF)

  • Retirement savings scheme for salaried employees of organized sector
  • Managed by EPFO under EPF Act, 1952
  • 12% of basic salary + DA contributed equally by employer and employee

Public Provident Fund (PPF)

  • Savings scheme backed by the Government of India
  • Open to salaried individuals, businessmen, professionals
  • Investment limit of Rs 1.5 lakh per year
  • The 15-year scheme can be extended in blocks of 5 years
  • Interest rate determined by the government every quarter

Voluntary Provident Fund (VPF)

  • Open to employees already contributing to the Employee Provident Fund.
  • Allows voluntary contributions over and above 12% of basic pay
  • Helps boost retirement corpus through higher savings

Provident Fund for NPS Subscribers

  • PF accounts offered under the National Pension System (NPS)
  • For salaried class and self-employed individuals
  • Flexible investment options and tax benefits

So in summary, EPF is for salaried employees in the organized sector, PPF is for investors, VPF is linked to EPF, and NPS has a PF component within it. Each serves retirement savings needs through different mechanisms.

What is Provident Fund Contribution?

Employee Provident Fund Contribution refers to the amount of money contributed every month by the employer and employee into the EPF account.

As per EPF rules, the contribution is 12% of the employee’s monthly basic salary and dearness allowance (if applicable). Out of the total 12% contribution:

  • 8.33% goes towards Employees’ Pension Scheme (EPS)
  • 3.67% goes to the EPF account
  • Employer and employee both contribute 12% each
  • So if the monthly basic salary is Rs 30,000, the monthly EPF contribution is 12% of Rs 30,000 which is Rs 3,600
  • Out of this, the employer’s share is Rs 1,800 and the employee’s share is Rs 1,800
  • Employer contributes Rs 2,500 (8.33% of 30,000) towards EPS
  • Balance Rs 1,100 (3.67% of 30,000) from employer goes to EPF account

EPF contribution is mandatory for eligible employees and employers. The employer deducts 12% Employee Provident Fund contribution from the employee’s monthly salary and makes a matching 12% contribution. This 24% combined amount is deposited into the EPF and EPS accounts.

Points to Consider For EPF Contribution

When deciding the Employee Provident Fund contribution amount, employees should keep certain points in mind:

  • Higher contribution leads to higher retirement savings. Employees can opt for VPF to increase their EPF contribution.
  • Young employees should start with higher EPF contributions as early as possible to maximize retirement corpus due to compounding over the long term.
  • Those approaching retirement should continue the maximum allowable contribution to get tax benefits and retirement income.
  • Employees should consider their annual income tax liability and increase EPF contribution accordingly to avail of Section 80C tax deduction benefits up to Rs 1.5 lakh a year.
  • If an employee has availed a home loan, they can reduce their Employee Provident Fund contribution and instead maximize home loan repayment to claim tax benefits under Section 80C.
  • If an employee has dependents, they should ensure sufficient term insurance coverage and then increase EPF contribution.
  • Employees should balance their monthly cash flows and allocate surplus savings to EPF to get guaranteed returns.
  • Before diverting funds to other investments, employees should utilize the EPF route fully considering the tax exemptions.
  • Those nearing retirement should consult a financial advisor to decide on allocating corpus to assured income plans.

So in summary, employees should assess their retirement needs, risk needs, tax liability and monthly finances before deciding the Employee Provident Fund contribution amount.

How to Check Your PF Balance

EPF members can check their provident fund balance through various methods:

  • UAN Account – Employees can log in to the UAN account on the EPFO website using their UAN and password and check their EPF balance.
  • SMS Service – Members can send an SMS to 7738299899 from their registered mobile number in the format “EPFOHO UAN ENG” to get their PF balance via SMS.
  • EPFO Online Services – On the EPFO member portal, the PF balance can be checked by logging in using UAN and password.
  • EPFO Mobile App – The Umang App can be used to check the provident fund balance after UAN login.
  • Missed Call Service – Members can give a missed call to 011-22901406 from their registered mobile number and get the Employee Provident Fund details via SMS.
  • EPF Passbook – The passbook is available online and can be downloaded using a member ID and account number. It shows the updated PF balance.
  • EPFO Office – Members can visit the nearest EPFO office and submit Form-3 IF to get their EPF balance statement.

Thus, UAN-based services, mobile apps, SMS facility, missed call service and passbook provide easy ways to check PF balance from home.

How to Withdraw, Claim or Transfer EPF?

The process to withdraw, claim or transfer the Employee Provident Fund balance is fully online and integrated with UAN. This has made the process faster and more convenient for members.

For EPF Withdrawal

Members can withdraw the Employee Provident Fund corpus on retirement after attaining age 55 years, or on termination of employment, whichever is later. Partial early withdrawals are allowed for expenses like housing, education, marriage etc. subject to conditions.

For EPF Claims

Members have to file a claim with EPFO for settlement of EPF corpus in case of retirement, resignation or death. The claim is settled within 20 days of filing. Nominees can file for EPF settlement if the member dies during employment.

For EPF Transfer

Members changing jobs can easily transfer their EPF account to the new employer using their Universal Account Number (UAN). The account is transferred online without any hassles. Members must transfer their EPF account rather than withdrawing to continue availing benefits.

Common Employees’ Provident Fund Mistakes

Here are some of the most common mistakes related to EPF that employees should avoid:

  • Not completing KYC formalities and linking UAN with Aadhaar. This delays EPFO services.
  • Forgoing EPF contribution and opting entirely for NPS. This limits retirement savings.
  • Not transferring EPF account when changing jobs. This leads to multiple inactive accounts.
  • Withdrawing entire corpus on leaving the job. This depletes retirement savings.
  • Not filing Employee Provident Fund nominations. This complicates the claims settlement for the family.
  • Not increasing EPF contribution over time. This results in inadequate corpus.
  • Not checking PF balance and statement regularly. This could delay detecting issues.
  • Not linking bank KYC with UAN. Delay in credits due to incorrect bank details.
  • Not keeping contact details like mobile number updated in UAN. Important for OTP-based services.
  • Not exploring pension and insurance benefits under EDLI and EPS. Benefits left unutilized.
  • Delay in filing EPF claims on time. Delays processing and settlement.

EPF Management in HRMS

EPF management can be streamlined and automated in an organization by using an HRMS (Human Resource Management System). Here are some benefits of handling Employee Provident Fund via HRMS:

  • Single centralized database for all employee EPF data rather than manual registers.
  • Automated EPF calculations as per income slabs and eligibility. Reduces errors.
  • Auto-deduction and remittance of EPF contributions instead of manual processes.
  • Electronic salary integration enables real-time Employee Provident Fund deductions.
  • E-returns and ECR filing with EPFO become seamless.
  • Updated PF statements and balances are available to employees anytime.
  • EPF transfers for employees changing jobs can be easily managed.

Thus, handling EPF via HR Management Software eliminates manual efforts, reduces errors, provides timely information to employees, and enables regulatory compliance.

Key Insights

The Employees’ Provident Fund (EPF) is a crucial retirement planning tool for organized sector employees in India. Salaried individuals must diligently contribute towards their EPF during their working life to build a retirement corpus.

Optimum EPF contribution, avoiding premature withdrawals, completing KYC formalities, regular balance tracking and seamless transfer on job changes are vital. Additional voluntary contributions to the EPF account can give one’s savings a significant boost.

Overall, the Employee Provident Fund enables employees to achieve their retirement goals and live life with financial security. With some planning and discipline, the EPF scheme can be optimized for maximum benefit.

What is the provident fund and how does it work?

Provident fund is a retirement benefit scheme in which a fixed percentage of basic salary is contributed every month by the employer and employee. The amount accumulates over time with interest to build a retirement corpus.

How much PF is deducted from salary?

12% of basic salary plus dearness allowance (if applicable) is deducted towards PF contribution every month. Out of 12%, 8.33% goes to EPS and 3.67% to EPF accounts.

What is the provident fund in salary?

It is the 12% deduction from basic salary towards PF contribution. It includes both employer’s and employee’s share.

What is a provident fund in HR?

PF is an important employee retirement benefit managed by HR in an organization through payroll deductions and remittances to EPFO.

Is PF compulsory?

Yes, PF is compulsory for organizations with over 20 employees for roles with up to Rs 15,000 basic salary.

Who is eligible for PF?

Employees under age 58 earning up to Rs 15,000 basic salary in the organized sector are eligible for mandatory PF.

What are the rules for PF?

The rules for the Employee Provident Fund (EPF) in India are primarily governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Under these rules:

Both employees and employers are required to contribute a fixed percentage of the employee’s basic salary and dearness allowance towards the EPF.
The current contribution rate stands at 12% of the employee’s basic salary for both the employee and employer.
The accumulated funds in the Employee Provident Fund account are meant to serve as a retirement corpus, and withdrawals are generally allowed only after retirement, resignation, or under specific circumstances defined by the EPF authorities.
The EPF corpus can also be used for purposes like home loan repayment, medical emergencies, and education under certain conditions.

How can I track my PF status?

You can easily track your EPF status through the following methods: 

Online Portal: Visit the official website of the Employees’ Provident Fund Organisation (EPFO) and log in to your EPF account. You can check your balance, transaction history, and other details online.
Mobile App: The EPFO offers a mobile app that allows you to access your EPF account information on the go.
Missed Call and SMS: You can check your EPF balance by sending an SMS or giving a missed call to the designated EPFO numbers. Ensure your mobile number is linked to your Employee Provident Fund account.
Universal Account Number (UAN): The UAN is a unique identifier for your Employee Provident Fund account. You can use it to access your account information and track your PF status.

What is the minimum PF amount?

The minimum contribution is 12% of an employee’s basic salary and dearness allowance (if applicable). You can increase the percentage by contributing to the Voluntary Provident Fund.

Can I check my PF balance?

Yes, the PF balance can be checked through the UAN account, UMANG app, SMS and missed call facilities.

Who controls PF?

Employees’ Provident Fund Organization (EPFO) controls and manages PF.

What is UAN’s full form?

UAN stands for Universal Account Number.

Who generates UAN?

UAN is generated by EPFO for each PF member.

How can I get my PF UAN number?

UAN is allotted by the employer at the time of PF registration and mentioned in the monthly payslip.

Is UAN only for employees?

Yes, UAN is allotted to employees who are EPF members.

Can an employee open UAN?

No, UAN is generated by EPFO. Employees cannot open it directly.

Is Pan and UAN the same?

No, PAN and UAN are different. PAN is for income tax, and UAN is for the PF account.

What is my UAN number?

UAN is provided by the employer in the monthly salary slip. You can also check your passbook.

Is UAN mandatory on payslips?

Yes, it is mandatory to reflect UAN on the monthly payslip.

Is UAN the same for every company?

Yes, UAN remains the same for an employee across all companies.

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