You are giving 12% of your basic salary to employee provident fund. This may be your only saving for the retirement years. But are you aware about the important rules of this significant saving? Do you know the rules of EPF contribution and EPF withdrawal?
You may be aware of the mandatory nature of this contribution. You would also know that after leaving the job, you will get the lump sum amount. The EPF is government backed therefore you would not be worried about it. But knowing it well can be very beneficial to you. These are the 8 rules of EPF which is less known but equally important.
You Can Opt Out Of EPF
We are never asked about the contribution into EPF. The EPF contribution is almost sure for every employee. The employer never takes your approval. It makes you the member of EPF automatically.
But, you can opt out of the EPF. You have the right to invest your retirement money as per your wish. The EPF contribution is not mandatory for everyone. However, to opt out of the EPF you should fulfil some conditions.
- Your basic salary should be more than Rs 15,000/month.
- Never before have you been a member of the EPF.
Therefore, if you want to skip the EPF, you must decide it while you get a job. You should tell your employer upfront. You must not sign the EPF membership form.
You Can Increase The Contribution To EPF
A provident fund account gives certain benefits. EPF gives a better interest rate than FD or government bond. It is most secure. It inculcates the discipline of investing as It is deducted before handing you out the salary. It gives you tax benefit under section 80 C.
So, do you think that EPF is the best investment avenue for the retirement? Do you find your present contribution of 12% insufficient?
You can contribute more than that. The EPF has the provision of enhanced contribution. It is better known as voluntary provident fund.
- You can contribute up to 100% of your basic salary in EPF account.
- The employer is not bound to match your contribution.
- You will get the tax benefit under section 80C on extra contribution as well.
- The extra contribution becomes the part of your EPF account. There would not be any difference.
- All the rules of loan, transfer and withdrawal would be same as the normal EPF account.
EPF Gives Group Insurance Cover
Very few of us aware of this EPF rule. The EPF also gives us group term insurance cover. The scheme is called as Employee deposit linked scheme. Our employer gives 0.5% of basic pay to this scheme. The maximum amount contributed by the employer to this scheme is Rs 75 per month. The insurance cover is 30 times of your monthly basic salary (capped at 15,000). In Addition with this a bonus of Rs 1.5 lakh is also given. Hence, the maximum group term insurance cover provided by the EDLI scheme is 6 lakhs (15000*30+1.5 lakh).
An employer can also give group term insurance cover to its employee through the private insurer. However, the benefit can’t be less than the government scheme.
EPF Withdrawal is Taxable
The investment in provident fund is tax-free. According to rules of EPF, the maturity proceeds and interest are also tax free. We take the tax benefit of EPF contribution. We never think of the tax on EPF Withdrawal amount.
But, we need to understand that tax benefit on EPF is subject to some condition. You might be enjoying the tax benefits of EPF from the first year of investment, but this benefit is subject to minimum 5 years of continuous service. Like any other tax saving investment, It also has the lock in period. If you try to withdraw the EPF balance before 5 years, you must pay back the tax benefit, you had availed. Now EPF itself cut TDS while you withdraw EPF.
There is No need To Transfer EPF Balance
The transfer of EPF balance has been a difficult task. But now It has become online. The online process of EPF transfer is very easy. Rather, transfer through UAN does not require an application from you. The EPF transfer through UAN gets automatically.
In the new system, the previous and new PF account gets linked to a single UAN. The EPFO transfers the PF balance of previous PF account to the new linked PF account. It does not require any application or mandate.
Employer Can’t Withhold Your Money
The notice period is the most dreaded thing after the resignation. Often the employee leaves the company in a huff. They do not serve the notice period. In such situation, the EPF balance is the only handle to arm twist the employee. Some employer’s never forward the PF withdrawal form to the regional PF office.
Do you think the employer has the right to do so? No. The Rules of EPF say that an employer can never withhold the EPF balance. The money never remains with them. The employers are the mere facilitator of EPF scheme. The erring employer can be also punished for this behavior.
However, you can also withdraw the EPF amount without the signature of the employer. You are required to do all the formalities and authenticate your application from a bank manager. You will get the PF in your account without any interference of employers.
Immediate EPF Withdrawal
Normally EPF withdrawal is not possible, just after leaving the job. You are required to wait for 2 months after leaving the job. If you don’t have a job for 2 months, you can apply for EPF withdrawal.
However, you may need PF money urgently. The EPF rules give some relaxation to such person. The EPF balance can be achieved instantly subject to these conditions.
- A girl employee is getting married or leaving the job for child birth
- An employee is migrating abroad
- The employee has died
I have written a detailed post on Instant EPF withdrawal.
You Did Not Get 100% EPF Corpus Before Retirement
You can withdraw the EPF corpus if you have been unemployed for 2 months. But this withdrawal would not be for full amount. The is a new rule of EPF withdrawal. Now, you can withdraw only your contribution to the EPF and interest on it. The employer’s contribution and interest will remain in the PF account till the retirement age (58 years).
Know EPF Balance Through A Missed Call
Checking PF account balance has become very easy now. A missed call can tell you the PF balance immediately. The service is free of cost. The number for missed call is 011 22901406. Immediately after the missed call you get an SMS, There would be details if PF account balance. However, there are other methods of PF balance check.
Your Personal Details Can be Wrong
Many of my readers are facing a troublesome situation. At the time of UAN activation or EPF withdrawal, they get to know about the wrong name or date of birth. The problem is very common. I, myself has gone through this situation. My date of birth was wrong in EPF records. There are so many people facing this problem.
The mismatch of the name, DOB and father’s name can derail the whole PF withdrawal and PF transfer process. Hence, It is good to rectify the personal detail in time. To know the personal details in EPF records, you should login on UAN portal. At the time of registration, you will get to know the error. To rectify personal details in EPF account, you need to give an application through the employer.
These rules of EPF are less known, but you should know them to avail maximum benefit from EPF.