The Employee Provident Fund (EPF) is a program introduced for salaried employees in corporate organisations with a staff count of 20 or more. Administered by the Employee Provident Fund Organization (EPFO) in India, it necessitates both employers and employees to contribute a portion of their salary to this fund. The primary objective of the EPF scheme is to build a substantial fund that employees can access upon retirement or in case of inability to work due to disability.
What is the Employees’ Provident Fund (EPF)?
The Employees’ Provident Fund (EPF) is a savings initiative designed by the EPFO under the Government of India's oversight. Both employers and employees contribute around 12% of the employee's allowance and basic salary to the EPF. At present, the interest rate on EPF deposits stands at 8.15% per annum.
The interest accrued on EPF deposits is tax-exempt, and you can withdraw it without any deductions. Upon retirement, employees receive a good amount that includes the accrued interest.
Accessing the official portal allows individuals to avail of multiple online services offered by EPF India. This easy-to-use platform ensures transparent and zero-hassle services for users.
EPFO - Employee Provident Fund Organization
The Employees' Provident Fund Organisation (EPFO) is a non-constitutional entity encouraging employees to make savings for their retirement. Established in 1951, it operates under the governance of the Ministry of Labour and Employment. EPFO provides schemes catering to both international and Indian workers.
EPFO - Schemes
The EPFO offers 3 schemes, namely:
- Employees' Provident Funds Scheme 1952 (EPF)
- Employees' Deposit Linked Insurance Scheme 1976 (EDLI)
- Employees' Pension Scheme 1995 (EPS)
EPFO - Objectives
The primary objectives of the EPFO are:
- Ensuring each employee maintains only a single EPF account.
- Simplifying compliance procedures for all stakeholders.
- Ensuring organisations consistently adhere to EPFO's regulations.
- Enhancing the expansion and reliability of internet-based services.
- Facilitating easy online accessibility to all member accounts.
- Reducing claim settlement duration from 20 to 30 days.
- Encouraging and promoting voluntary compliance among members.
EPF - Eligibility
The eligibility criteria to enrol in an EPF scheme are:
- Open to employees from both the private and public sectors, providing an opportunity for all employed individuals to become members of EPF India.
- Organisations with a workforce of a minimum of 20 individuals are obligated to offer EPF benefits to their employees.
- Once individuals become active members of the EPF scheme, they gain eligibility for various benefits, including pension and insurance benefits provided by the Employees Provident Fund.
EPF - Interest
The interest earned on investments within a PF online account remains tax-exempt.
- This interest is applicable solely to active employees’ PF accounts who haven't retired yet. However, the interest that is accrued on these accounts is taxed based on an EPF employee member's applicable tax bracket.
- It's important to highlight that the contribution made towards the Employees Pension Scheme doesn’t accumulate interest.
- Also, members become eligible to avail a pension from this collected sum upon reaching the age of 58.
Interest Calculation on EPF
The interest provided on EPF schemes is computed monthly by dividing the annual interest rate by 12, facilitating the calculation of the specific interest for each month. For example, if the interest rate is 8.5% per annum, the monthly rate would be (8.5/12) %, i.e., 0.7125%.
When an individual's salary is Rs. 15,000 per month, 12% of this amount, which is Rs. 1,800, is directed towards their EPF account. Meanwhile, employers contribute 3.67% towards the employee's EPF account and 8.5% towards their EPS account. Consequently, the EPF contribution from the salary would be 3.67% of Rs. 15,000, amounting to Rs. 550. Thus, the total contribution towards the EPF account equals Rs. (1,800 + 550) = Rs. 2,350.
The interest accrued in one month would be calculated as Rs. 2,350 multiplied by 0.7125%, resulting in Rs. 16.75. It's important to note that the interest accrued in a particular month gets credited to the account at the end of the current financial year.
EPFO - Benefits
The EPF scheme offers several benefits to its members, including:
- Capital Appreciation: The PF online scheme provides a predetermined interest on deposits held with EPF India. Upon maturity, additional rewards ensure enhanced growth in employees' funds, fostering capital appreciation.
- Corpus for Retirement: Approximately 8.5% of an employer's contribution is allocated to the Employee Pension Scheme (EPS), helping in the creation of a robust retirement corpus. This corpus ensures financial security and independence for employees post-retirement.
- Emergency Corpus: An EPF fund serves as an emergency corpus, offering financial support during unforeseen circumstances, enabling individuals to deal with unexpected situations more effectively.
- Tax-saving: Contributions made by employees towards their PF account qualify for tax exemption under Section 80C of the Indian Income Tax Act. Furthermore, earnings generated through EPF schemes enjoy tax exemption up to a limit of Rs. 1.5 lakh.
- Easy Premature Withdrawal: EPF India members have the flexibility of partial withdrawal, enabling them to access funds for various needs such as home construction, higher education, medical treatment, or wedding expenses.O
Are there any rules for EPF?
Yes, there are certain rules for EPF. Any individual earning more than ₹15,000 must have a PF account. The employer must pay the matching contribution of 12% to the employee’s account. Employees may mutually demand with their employer under clause 26(6) to contribute more to the fund than the maximum of Rs 15,000 in order to be eligible for a higher pension.
How many times can an employee withdraw their EPF?
An employee can withdraw a certain amount from their EPF as many times as they want to. However, the maximum amount that they can withdraw is either six times their salary or the total share of the employee, whichever is less.
Which organisation is not eligible for PF?
An organisation that has below 20 employees cannot register for EPF.
How can you withdraw a hundred percent PF amount?
You can only withdraw your full PF amount when you have reached the age of 58 years or have retired from your service.