Employees’ Provident Fund (EPF) is a social security scheme for retirement that is available to all salaried employees. It a scheme managed by the Employees’ Provident Fund Organisation (EPFO) under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. A portion of the employee’s basic salary and an equal amount contributed by the employer is deposited in the fund.
These funds are pooled from many subscribers and the money invested is managed by the EPFO. This investment earns an interest between 8 – 12%, as decided by the government. For the financial year 2017-18, the interest rate is 8.55%. Upon retirement, or if unemployed for 2 months or more, the employee gets a lump sum amount (which includes his contributions from salary and the employer contribution, as well as the interest earned).
EPF gives the employee tax benefits on the contribution under Section 80C, interest earned and the amount withdrawn at retirement. The contribution from employee’s salary is tax deductible under Section 80C of the Income tax Act up to Rs 1.5 Lakhs a year and employer’s contribution is exempt from tax. The interest earned and the lump sum withdrawn (under the condition that the withdrawal is after the minimum specified period of 5 years) are exempt from tax.
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Earlier, the EPF scheme allowed withdrawal after 2 months from the date of termination of employment. To become eligible for the pension, the employee must have contributed consecutively for the past 10 years. If the account is closed prematurely, the employee would no longer be eligible to receive pension.
Under the new regulations which took effect from June 2018, the employee can withdraw 75% of the available balance from his EPF after 1 month from the date of termination of his employment. He can choose to withdraw the entire amount from his account after two months.
What is EPF? Employee Provident Fund (EPF) is a scheme in which employees deposit a small portion from his/her salary (12% of the basic pay + Dearness Allowance) each month. Employer too is required to contribute the exact same amount each month towards employee EPF. PF scheme was developed in 1952 to secure employees’ post retirement life. Employees drawing a monthly salary of less than Rs 15,000 must register for EPF. Employees drawing a monthly salary of more than Rs 15,000 can register with approval from the PF commissioner.
How does PF scheme work? Employees must deposit 12% of their basic pay and the employer too shall make the same contribution to the employee’s EPF account. However, an employee can make higher contribution (VPF – voluntary provident fund) but the employer’s contribution shall remain the same. The amount accumulated in the EPF account earns interest on an annual basis. An employee would receive universal account number (UAN) upon registration and this is transferrable at all times. EPF is a risk free and protected scheme which secures employee’s retirement.
When can EPF be withdrawn? One needs to stay away from the temptation of early EPF withdrawal in order to enjoy the full benefits at retirement. One can withdraw EPF partially or completely as per requirements. Complete withdrawal can be made in the following circumstances;
Partial withdrawal can be made at various life events which are mentioned below;
How to apply for EPF withdrawal? Previously, employee was required to get employer’s approval for EPF withdrawal. Getting an approval from the employer was difficult for many employees and hence EPFO circumvented the need for it. Withdrawal can be done in two ways; application through physical submission and online submission .
Application by physical submission: You need to follow the below mentioned steps for physical submission of the application;
Application by online submission: For online submission, you need to have your UAN, KYC (Aadhar and PAN), bank account details and the phone number linked with the UAN. You need to follow the below mentioned steps for online submission of application;
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