Employee Provident Fund (EPF) is a retirement saving scheme for organised sector employee. It is mandatory for those who earns less than Rs 15,000 basic salary per month. The workers with higher salary can also join it. Once you join it, you can’t leave it.
Any organisation which employs more than 20 people is bound to give the Employees’ Provident Fund facility to its employees. Every employee contributes a defined percentage of their salary into the employee provident fund. The employer also matches this amount and contribute.
The Employee Provident Fund is managed by the EPFO board. The board has the representative of the government, employers and employee. The EPF invests the majority of its corpus in the government securities. It has started to invest 5% of new contribution into the stock market as well.
In this post, I would tell you top 10 facts about the Employees’ Provident Fund.
1. You Can Check EPF Balance Online
You and your employer contribute into Employees’ Provident Fund every month. This contribution goes through the employer. To keep yourself updated you must keep track of your EPF balance. It will ensure that there would not be any surprises in the future. Thus, you must check the EPF balance regularly.
The Employees’ Provident Fund balance check has become very easy. There are 7 ways to check the EPF balance. SMS, missed call and online platform is used to check the PF balance. Now you can know the Employees’ Provident Fund balance at the end of the last month.
2. You Can Transfer EPF Online
Job change is very common. With every new job, you get new PF account. Thus, it is necessary to transfer the provident fund amount of the previous account to new account.
The PF transfer is must because old account stops paying interest after 3 years of non-contribution. Keeping multiple PF account is also a hassle. Also, the pension amount is based on the total service. If you do not transfer the EPF, the total pensionable service would not count the duration of the previous service.
The Employees’ Provident Fund transfer has become very easy now. An employee can apply for PF transfer online. For online PF transfer, you need the approval of only one employer i.e either previous or present. Along with the transfer of EPF, the pension amount also gets transferred.
Through the universal account number (UAN) the EPF transfer has become very easy. Once, you give your existing UAN to the new employer, the PF balance from the old account gets transferred automatically.
3. Every Employees’ Provident Fund Member Gets UAN
The universal account number (UAN) is allotted to every employee who is the member of EPF. It also includes the recognised PF trusts. The universal account number of an employee does not change with the change of the job.
Your identification and KYC details get attached with the given UAN. This UAN also attaches all the PF accounts of a person. The UAN has reduced the role of the employer for authentication of an employee.
To use the UAN facility completely, you should get it activated at UAN portal.
Know more about the universal account number (UAN)
4. You can Withdraw 100% of EPF Only After Leaving Job
The employee provident Fund (EPF) is a retirement saving instrument. You get the EPF corpus only after the retirement. However, there are certain condition when you can get back your 100% EPF corpus before the retirement.
You can withdraw whole EPF corpus after leaving a job. But to get the PF amount you should remain unemployed at least for 2 months. According to rule, a person with employment can’t withdraw the EPF. This rule is there to ensure the retirement saving till the old age.
However, the 2-month unemployment condition for PF withdrawal is not applicable in certain situations. You can also get the PF instantly after leaving the job.
5. You can Partially Withdraw EPF If Need Arises
You may need a big amount anytime. The medical emergency can knock anytime. In such dire circumstances, the PF corpus can come handy. You can partially withdraw your PF balance in certain needs.
Employees’ Provident Fund can be withdrawn for medical treatment, higher education, marriage, and home purchase. However, to avail this facility you are required to fulfill some criteria. Every cause of withdrawal has the different criteria. You can read in detail about the partial EPF withdrawal in my other post.
6. Employers Don’t Have any Right Over Employees’ Provident Fund
The enrolment and contribution of Employees’ Provident Fund are managed by the employer. Often, this system gives an impression that employer has the hold over the EPF corpus of the employee. Whereas it is not true.
The employers play the role of authenticator and facilitator. Once an employer deposits the contribution of an employee, it can never get it back. The EPF corpus belongs to the members.
7. You can Withdraw PF Without Employer’s Approval
Since EPF corpus belongs to the employee, an employer can’t withhold it on its whims and fancy. However, many employers have been threatening the employees to block their retirement saving. Employers used the PF corpus as a handle to arm-twist the employees.
There has been an alternative method of EPF withdrawal without employers signature but the success rate of this method was low.
Now, the situation has changed dramatically after the introduction of UAN. Once you get the UAN activated and linked it to the Adhaar, the EPF withdrawal becomes very easy. The new EPF withdrawal form gives you the liberty to directly send the form to the regional EPF office.
8. EPF Gives Tax Benefit
The employee Provident Fund (EPF) gives you the benefit of tax saving as well. Your contribution to the PF account is tax deductible under section 80C. The amount you contribute to the EPF account gets deducted from your taxable salary. You can also contribute more than the mandatory 12% of your salary. This voluntary contribution to PF can go up to 100% of your basic salary.
The employer also contributes its part into the PF account of its employee. The employer’s contribution up to 12% of employee’s basic salary is exempt from income tax. It means the employer’s contribution is not considered for tax.
The maturity amount of PF is also not subject to tax. Thus, EPF is an Exempt, Exempt and Exempt investment scheme. It gives all round tax benefit.
9. Premature Tax Withdrawal Reverses Tax Benefit
Like any other tax saving investment, there is a minimum period of investment for availing the tax benefit. To get the tax benefit of Employees’ Provident Fund, the contribution should be at least for 5 years. The contribution should be continuous. Meanwhile, you can change job but the PF should be transferred to avail the tax benefit.
If you withdraw the PF without completing 5 continuous years of service, the PF withdrawal would be taxable. The TDS would be applicable if the withdrawal amount is more than the 50 thousand.
10. Pension is Associated With EPF
The Employees’ Provident Fund scheme comes along with two other schemes. It also assures the pension after retirement and life insurance during the job. The employee pension scheme is also clubbed with the PF. From the employer’s 12% contribution, 8.33% (maximum 1250/month) goes for the employee pension scheme. The 0.5% (maximum Rs 75) is used for the employee deposit linked insurance scheme.
The pension scheme gives the pension after retirement. It also gives pension to the family members if the employee dies before the retirement. Whereas the EDLI scheme gives life cover of up to Rs 6 lakh.