What is EPF?
‘Employee Provident Fund’ or ‘EPF’ is regularly deducted per month from your salary, but many of you still don’t have the complete idea of what it is. Thus, to help you understand EPF and related terms in a simple language, we are here with this all-in-one article.
What is a provident fund?
In short, EPF is a fund contributed by you and your employer per month. The entire amount is paid to you with interest in case of retirement or two months after changing the job. Don’t worry; it’s just an overview of EPF. Continue reading the article to get in-depth details about withdrawals, interest rates, schemes, etc. mentioned in the article below.
The Employees' Provident Fund Organisation (EPFO) is the Government body that manages the EPF scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
For a complete understanding, let’s take a look at the Employee Provident Fund Organisation.
EPFO and its Applicability
EPFO (Employees’ Provident Fund Organisation) is India’s largest social security organisation, which mainly encourages people to save for life after retirement. Likewise, the law that governs EPF is now referred to as the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. The Act applies across India (except Jammu and Kashmir) to the Government as well as private-sector employees.
For Jammu & Kashmir, there is ‘Jammu and Kashmir Employees Provident Fund Organisation’ (A Statutory Body Under Department of Labour and Employment, Government of Jammu and Kashmir).
Who should register for EPFO?
An organization with more than 20 employees should register with EPFO. Upon registration, each employee gets a separate UAN (Universal Account Number) to access the EPF account details on the EPFO portal.
In recent days, COVID-19 and subsequent lockdowns have adversely affected the EPF registration. However, recent reforms like work from home and safety precautions enabled companies to get back on track and recover from the COVID-19 impact.
Similarly, according to the recent data published by EPFO on 20th October 2020, the subscriber base of EPFO is increased by 20 lakhs. During July 2020, approximately 7.49 lakh net new subscribers were added, which is around 64% of the total subscribers added during the same month of the previous year (July 2019).
What are the schemes of EPFO?
EPFO has structured 3 schemes for employees across India.
1. EPF Scheme 1952
- Total saved money with interest after retirement and death.
- Partial withdrawals in case money required for education, illness, marriage, and house construction.
- Contains Housing Scheme for EPFO members.
2. Pension Scheme 1995 (EPS)
- Monthly allowance for superannuation/retirement, disability, survivor, widow(er), and children.
- Minimum allowance of pension on impairment.
- Previous service advantage to participants of the former Family Pension Scheme, 1971.
3. Insurance Scheme 1976 (EDLI)
- EDLI scheme benefit is provided in case the member of the scheme dies.
- The compensation amount is 20 times of the employee wages (Up to 6 lakh maximum benefit).
Working of EPFO: Contribution and Interest rates
Employee’s Contribution towards EPF
Employee’s contribution means the money will be deducted from the employee’s basic salary amount.
Generally, the contribution rate for the employee is fixed at 12%.
However, the rate is at 10% for the following organisations:
A) Companies that employ a maximum of 19 employees.
B) Industries that are declared as sick industries by the BIFR (The Board for Industrial and Financial Reconstruction).
C) Companies suffering annual loss greater than their net value.
D) Coir, beedi, guar gum, brick and jute industries.
E) Companies that are operating under a wage limit of ₹ 6,500.
Employer’s Contribution towards EPF
This money will be deducted from the employer’s end.
The minimum amount of contribution to be made by the employer is fixed at a rate of 12% of ₹ 15,000. This 12% is distributed as 8.33% towards Employees’ Pension Scheme and 3.67% towards Employees’ Provident Fund. Additionally, the employer pays a 0.5% contribution towards EDLI, totalling 13.61% of the salary towards EPF scheme. Therefore, the contribution as mentioned above from both parties is added to the EPFO (Employees Provident Fund Organisation) account of the employee.
Current Interest Rates on EPF
In the pandemic scenario, the Union Labor Minister, Santosh Gangwar announced the new interest rates for EPF on 3rd March 2020. The interest rate for the scheme has been lowered by 0.15% for the current financial year. Thus, the current interest rate on money deposited in EPF accounts is 8.5% as compared to the previous 8.65%. Additionally, EPFO has recommended splitting the payment of the interest rate of 8.5% for the financial year 2019-20 into two parts given the “exceptional circumstances arising out of COVID-19”. Therefore, the EPFO is currently offering 8.15% to its subscribers for the year immediately and will give the remaining 0.35%, which is linked to its equity investments, before 31st December 2020.
Considering the volatility in stock markets due to the COVID-19 impact, the 2020-21 financial year EPFO interest rates will be finalised in early 2021.
Functions of EPFO
EPFO primarily performs two functions,
1. A governing body of the 1952 act to see the proper implementation
2. A service provider
As the service provider and regulator, EPFO ensures that every registered employee gets retirement benefits, whether from private or Government sectors. Likewise, EPFO performs tasks like maintaining individual accounts, settling claims, and regulation of payments under the pension scheme.
To provide better services, EPFO has recently implemented many digital initiatives for easy access to users and provide a wide range of services to organisations, domestic employees, onsite international employees, and pension holders.
Following are some of the most useful services that EPFO offers
1. Universal Account Number (UAN)
After successful registration with EPFO, the employee gets a 12-digit UAN. In 2014, the Indian Government launched UAN to enable the employees to link multiple EPF accounts to a single account. Thus, UAN is permanent for all EPF holders, and it won’t change even if you switch jobs.
Additionally, a person having an active UAN number can use E-Sewa portal to see information like KYC, Profile, Service History, UAN card, and EPF passbook, EPF tracking status, etc.
2. Easy Online Registration
Companies can easily register on the EPFO portal by filling in some important details required by the Ministry of Labor and Employment. You are not required to visit the EPFO office. Along with the required documents, any company representative can update the details on the online portal from anywhere.
Employees can withdraw money from the EPF account when they are unemployed longer than two months or didn’t find any job within 60 days after leaving the present job. Following cases are exceptions for EPF withdrawals,
1. If the person is employed in a foreign territory
2. If the person is female who is leaving service to get married
Additionally, you can also withdraw some amount from EPF account in the following cases,
1. Money required for yourself or sibling’s marriage, education, and emergency medical expenses
2. Medical expenses for parents, spouse, or children
3. If an employee’s age is 54 years or more, withdrawal up to 90% of accumulated balance with interest can be made within one year of retirement.
4. While purchasing a house, flat, or construction of a house, including acquisition.
5. If you have completed 10 years of service, you are eligible to withdraw money for house repairs and house loan repayment.
4. Easy online payment of EPF
From September 2015, organisations must pay EPF online on the EPFO portal or their bank website.
Presently, many banks have online easy-to-use apps to pay the EPF online.
5. Online Complaint
Grievance service has reduced the issues of employees to a large extent as it is online. With the use of the EPFO grievance system, employees can file a complaint related to their EPF account, including PF Withdrawals, Transfer, etc.
6. Account updates through SMS and Missed Call
You should have an active UAN number to avail SMS and Missed Call services. Once the UAN is activated with a registered mobile number, you can get account details with SMS: EPFOHO<UAN><LAN> to 7738299899. LAN is the first 3 letters of the preferred language, e.g. HIN for Hindi, ENG for English.
Similarly, users can give a missed call on 011-22901406 through their registered mobile number to know their PF balance.
7. EPF Customer Care number
In case you are not accustomed to online facilities, you can call EPF customer care to resolve the doubts or problems.
EPFO Helpdesk Number: 1800118005 (Toll-Free)
Bhavishya Nidhi Bhawan,
14, Bhikaji Cama Place,
New Delhi- 110066
In conclusion, every employee needs to know their finances and take proper decisions to secure their future. Most of the employees tend to have lesser financial awareness that adversely affects their net income and profits. Therefore, we have specifically designed this article to give you an in-depth idea of EPF that will further enhance your financial awareness and ultimately boost your confidence in terms of decision making and investing.
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