Employee Provident Fund (EPF): Meaning, Eligibility, Process & Benefits

In India, all employees receive their salary after a portion of it is deducted for provident fund. After retirement, when you have to maintain your lifestyle without any fixed salary, money that you save in EPF or Employee Provident Fund will help you unconditionally. 

Keep reading to learn more about Employee Provident Fund. 

What is an Employee Provident Fund?

Employee Provident Fund (EPF) is one of the most well-known savings schemes that was launched under supervision of government of India. This scheme is regulated by Ministry of Labour. It is a savings scheme for the salaried class in order to help them inculcate the habit of saving money and build a substantial retirement corpus. 

This scheme is regulated by three different acts namely Employee Provident Fund and Miscellaneous Provisions Act of 1952, Employee’s Deposit Linked Insurance Scheme Act of 1976 and Employee’s Pension Scheme Act of 1995.  The funds in this scheme are built with monetary contributions from both employees and their employers every month.

Each of them contributes 12% (Basic + Dearness allowance) of the employee’s monthly salary as their share of contribution towards this scheme. Therefore, 24% of the basic salary goes towards this scheme. 

For example, let’s say you pay ₹5000 every month from your salary for this scheme. Your employer will also match it up with ₹5000 making it a total of ₹10,000. You will receive 8.5% interest on this amount every year according to the current interest rate. This is how an EPF scheme works.

This fund also accrues a pre-fixed rate of interest which is set by Employees Provident Fund Organisation. After your retirement, you will receive the entire contribution of employee and employer in the form of a lump sum along with the interest. This interest is tax-free. Government of India has made it mandatory for employees to contribute to this scheme.

Objectives of EPFO in India

Employee Provident Fund Organisation aims to achieve the following primary goals:

• To make sure that all employees have a single EPF account.
• Ensure that all organisations follow all rules and regulations of EPFO on a regular basis.
• Decrease amount of time taken to resolve disputes from a month to 72 hours.
• Easy accessibility of all member accounts online
• To ensure updating of member accounts on a regular basis
• Encourage and promote voluntary compliance

Eligibility criteria for employee provident fund

Let us take a look at the eligibility criteria for opening Employee Provident Fund: This scheme is open to employees of both public and private sectors. Therefore, anyone drawing a salary is eligible. Companies that have more than 20 employees have to compulsorily register with Employee Provident Fund Organisation. Even companies that have less than 20 employees can voluntarily register. Employees earning less than ₹15000 should mandatorily register for EPF. Even employees with more than ₹15000 salary can also voluntarily register. Every Indian citizen, except those belonging to Jammu and Kashmir, can opt to benefit from provisions of EPF.

Employee Provident Fund calculation

Here is the easiest way to calculate the amount you need to contribute to EPF:

As both employees and employers need to contribute 12% of their basic salary to EPF, the calculation will be something like this:

Employee Contribution to EPF= 12/100 * (Basic + DA)

For example, if your Basic Salary is ₹5000 then the calculation will be

EPF= 12/100 * 5000

EPF= ₹600

You need to keep in mind that the interest is only provided once a year and is divided monthly. For instance, your running balance is ₹5000 and the interest rate is 8.50% p.a. 

Let us calculate the monthly interest rate 8.50/12 = 0.7083%

Therefore monthly interest will be 

EPF interest = Running Balance for the Month * Interest Rate / 100%

EPF interest = 5000 * 0.7083 / 100%

EPF interest = ₹35.42

EPF application process

Any employer can register their establishment online by providing the following details:

• Establishment details like name, address, PAN, incorporation date, and type of address.
• In case of startup or MSME, Startup India registration details and MSME registration details.
• In case of a factory, employer needs to provide date of license, Factory license number, etc.
• Contact information like email ID and mobile number of an authorised person.
• Name, date of birth, PAN, address details and designated date of joining of a contact person
• License information or identifiers
• Details regarding employee strength, gender, wages, type of activity etc.
• Branch details like name/premise number, address, and Labour Identification Number.
• Provide National Industry Classification, nature of business, and activities.

Following is a list of documents an employer will require to furnish:

• PAN card of proprietor or partner or director
• Aadhaar card of proprietor, partner or director
• Proof of address like utility bills of registered office
• Digital signature of proprietor or partner or director
• License proof issued either by Identifier or Licensing Authority
• Cancelled cheque or bank statement of entity
• Hired, rented or Leased agreement if any
• GST certificate, establishment certificate or license issued by government

Here are steps on how an employer can register their establishment for EPFO scheme:

Step 1: Visit the official website of EPFO and select ‘Establishment Registration’ option on the homepage. 

Step 2: You need to click on ‘Sign Up’ and register on Unified Shram Suvidha Portal (USSP) by providing your Name, Email, Mobile number, Verification Code and click on sign up.

Step 3: After creation of USSP account, employer needs to log in to USSP and select ‘Registration For EPFO-ESIC’ option. Next, select ‘Apply for New Registration’ option. 

Step 4: From the two options that appear on screen, select ‘Employee’s Provident Fund and Miscellaneous Provisions Act 1952’ option and click on ‘Submit’. 

Step 5: A new ‘Registration Form for EPFO’ page will open and employer needs to fill in all the details mentioned above in all the respective sections. In ‘Attachment’ section, provide all necessary documents by clicking on ‘Upload’ and ‘Save’ option. 

Step 6: Finally, click on ‘Digital Signature’ and attach it. After this, you will receive a successful completion of registration form message and a mail from USSP confirming that EPFO registration is complete.

Let us take a look at the process by which an employee can register on member portal:

Step 1: Visit the EPFO official website and under the ‘For Employees’ section click on ‘Member Portal’. 

Step 2: A new page will open. Click on ‘Register’ to continue.

Step 3: In the new page that opens, enter all the details choose one document from the drop-down menu. 

Step 4: After this, type the characters carefully and click on ‘Get PIN’. Next click on ‘I Agree’ and then ‘Submit’.

You are now a member and you can log in by selecting type of document and entering document number and mobile number.

Types of EPF forms

EPF forms are crucial for every EPF-related activity like registration, withdrawal, PF transfer or availing loan etc. Following is a list of all the EPF forms and their functionality:

• Form 2: For nomination
• Form 5: Registration form
• Form 5IF: Avail claim for EDLI scheme
• Form 10C: Claim withdrawal benefits under EPF scheme
• Form 10D: For monthly pension
• Form 13: Transferring EPF account
• Form 14: Purchase LIC policy
• Form 15G: Avail tax benefit
• Form 19: Final settlement form
• Form 20: Settlement of EPF in case of account holder’s death
• Form 31: For obtaining withdrawal, loan and other advances
• Form 51F: Nominee can use this to claim benefits of Employee’s Deposit Linked Insurance

Benefits of Employee Provident Fund

EPF offers an array of benefits towards EPF employees. These are:

• Huge corpus for retirement
  In the long run, the sum which you and your employer contribute towards Employee Provident Fund helps in accumulating a huge corpus for your retirement. This corpus will give you that sense of financial independence and security so that you can lead a peaceful life after retirement. 
• Growth of capital
  In addition to the pre-fixed interest rate on your deposit, you will also receive added rewards when you retire and this will ensure further growth in your EPF corpus and will accelerate capital appreciation.
• Tax saving
  As per section 80C of Income Tax Act, the amount that you contribute towards your EPF account is eligible for tax exemption. You can claim for an exemption as high as ₹1.5 lakh. Other than that, the earnings from this scheme are also exempt from taxes.
• Emergency savings
  You may never know when you might find yourself in a crisis situation; therefore, it is ideal to be prepared financially to face such situations in the best that you can. Funds that you save in your EPF account can be utilised by you to face any type of emergency situation. 
• Premature withdrawal
  If you become a member of EPF India, you will be eligible for partial withdrawal of funds. If you wish to pursue higher education, have wedding expenses, are constructing a house, or wish to opt for medical treatment, you can withdraw funds from your PF fund to meet these financial requirements.

Employee’s Contribution towards EPF

Following is a tabular representation that will help you understand the percentage of contribution of different categories:

EPF contribution can however vary, and the contribution can be 10% in case the company incurs losses more than its entire net worth, if it has been established for less than 20 years, or if it is associated with brick, beedi, jut, guar gum or coir industry. 

However, contributions can also be less in case of women so that they can take home higher salaries and so that companies hire a greater number of women employees. Even when a female employee contributes only 8%, the employer still has to pay 12% or more than that.

How to check your EPF balance?

You can easily check your EPF account balance by downloading your EPF online passbook. The steps to download your passbook are as follows:

Step 1: Visit the EPF website.

Step 2: Go to the EPF site index.

Step 3: Select the ‘e-Passbook’ option.

Step 4: In the new tab that opens, enter your UAN, password, Captcha code and click on ‘Login’.

Step 5: Once you are redirected, select your member ID in case you have multiple IDs.

Step 6: Links will be available for viewing and downloading EPF passbook as well as viewing claiming status.

In case you have your UAN, you can also check your balance by sending an SMS from your registered mobile number to 7738299899. Type ‘EPFOHO ENG. ENG is for the language you want to get the notification in. You can also choose Hindi or any other language from the list of 10 languages. 

Another way to get your balance is by Missed call method in which you get the details by giving a missed call to 011-22901406. In order to use both these techniques, you need to have your UAN linked with your KYC.

How to transfer EPF account?

Here are the steps which you can follow if you wish to transfer your EPF account:

Step 1: In case you change your job you can transfer your EPF account using your UAN or Universal Account Number.

Step 2: Visit the official EPF member portal and register yourself in the manner mentioned earlier. 

Step 3: After that, log in with your credentials.  

Step 4: Once you are redirected, go to the Online Transfer Claim Portal and request EPF transfer with the same information as before. 

Step 5: Submit form 13 in case you are not eligible for an online transfer. 

Step 6: If you are eligible, choose ‘Request for Transfer of Funds’ and enter all necessary information about your previous employment. 

Step 7:  After you submit all the required information, you will receive a PIN on your registered mobile number.

Step 8: After this, you will need your old or new employer to authenticate it.

Step 9: You can track your application using the tracking ID issued to you.

Withdrawal protocol for EPF

You can opt for either partial or complete EPF withdrawal. However, this is possible under certain circumstances. Here are a few reasons why you might withdraw partially:

• Higher education
• Wedding
• Repayment of home loan
• Construction of house or purchase of land
• Renovation of housing property

Following is a list of reasons why you can withdraw from your EPF account completely:

• In case unemployment period extends more than two months
• Retirement
• In between jobs or changing professions. However, this needs to exceed 2 months.

Here are the steps which you follow to withdraw from your EPF account offline:

Step 1: You need to fill up ‘new composite claim form’ or ‘composite claim form’. 

Step 2: You need to get it attested by your employer. 

Step 3: After this, you need to submit this form to the EPFO office which is under regional jurisdiction. 

Steps to withdraw from your online EPF account

Step 1: Log in to the EPF e-SEWA portal with your UAN and password and captcha code. In case you have forgotten your password, reset it by sending OTP to your mobile number.

Step 2: Look for ‘Claims’ in ‘Online Service’ section.

Step 3: Enter your bank account number for verification after this section opens.

Step 4: After verifying your details, confirm terms and conditions then click on ‘Proceed for Online Claim’.

Step 5: From the drop-down menu choose a reason for withdrawing from this scheme. Only those options you are eligible for will be shown.

Step 6: After selecting the reason, you will need to upload documents like a cheque or passbook. 

Step 7: Accept terms and conditions before requesting for OTP for verification.

Step 8: After entering OTP, your claim application will be submitted.

Conclusion

EPF is an excellent savings scheme to build a sufficient retirement corpus for every person who receives a salary. You can change your jobs multiple times, but the account can be transferred multiple times. 

Not only do you get the benefits of tax savings by investing your money in this scheme, but EPF alsohelps you earn good returns as the interest rate is on the higher side.