Employee Provident Fund (EPF) India: All you need to know

Employee Provident Fund is a famous saving scheme operated by the Indian Government for salaried individuals. This scheme is aimed to flourish retirement savings for all Indian employees.

Precisely, it is a corpus of funds, regulated by contributions of employee & employer. The contributions will regularly be made, mostly monthly by both parties. The contribution amount will be fixed from the start. Interest will be paid on the EPF balance. Both EPF balance and interest accrued are non-taxable. Tax benefits are the main attraction associated with this scheme. The withdrawals are allowed once the maturity period is finished. But still, pre-mature withdrawals can be made in the case of resignation or death of the employee. In exceptional circumstances when the employee cannot work, this saving scheme comes handy.

What are the Benefits of Employee Provident Fund Scheme?

The EPF scheme is considered as the most attractive retirement saving plan in India. Here are the key benefits that make EPF as the most significant saving scheme:

Tax Benefits: The employee earns the interest on his/her EPF balance. The interest accrued is completely tax-free. Withdrawals made after the maturity are non-taxable too. That is why people always fall for this scheme. The contributions made for EPF account are taxable as per section 80C of Income Tax Act.

Financial Security: This scheme provides financial security after retirement. The withdrawals are allowed after completion of the maturity period. But premature withdrawals are available for special circumstances. Such as, resignation, death, disability or discharge from the work.
Long-Term Investment: It acts as the long term investment with tax benefits.

Source Of Funds: In a case of emergency, the EPF serves as the source of liquid funds.
Pension & Insurance: Every employee who is eligible for EPF also contributes towards pension and insurance scheme. Both are beneficial after retirement.

Universal Account Number (UAN): The employee can access the account via single point thanks to Universal Account Number.

Who is Eligible for Employee Provident Fund?

All the members of an establishment are eligible for EPF, when they join the institution. The only requirement is the number of employees. The establishment should have 20 or more employees in order to avail this scheme. If you are eligible for EPF, so does for insurance and pension plans. This way, EPF, insurance and pension makes the best retirement trio plan!

Employee Provident Fund Contributions

An EPF account is comprised of contributions. Here are the key facts about contributions:

  • Both employee and employer make the contributions.
  • It is always fixed and predetermined
  • Regular on monthly basis
  • The rate will be determined as per the employee’s basic salary plus DA
  • The current rate of contribution is 12%. But in following cases, it is down to 10%:
  • If the establishment has employees less than 20
  • Sick industries, which are recognized by BIFR
  • The establishments with net losses which are higher than net worth
  • Establishments which produces jute, beedi, coir, brick or guar gum
  • Establishments which have set fixed wage limit of Rs. 6,500

Interest Rate on Employee Provident Fund

The account holder earns the interest on the EPF deposit. The current interest rate determined by Government is 8.5 per annum. Every year, the Indian Government decide the interest rate for EPF account. Here are the prime facts about interest rate on EPF:

  • Interest is earned on every EPF balance, which is completely tax-free. The interest earned is calculated and accrued as per the predetermined interest rate for the year.
  • The financial year starts from April 1st to March 31st. It means, 8.8% interest rate is set for EPF balances for tenure of April 1st 2019 to March 31st 2020.
  • The interest is calculated monthly but accrued annually.
  • No interest will be credited if EPF account is inactive or inoperative.
  • No interest is allowed for withdrawn amounts.
  • No interest will be credited for amounts transferred to EPS by the employer.
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Employee Provident Fund Forms

The most common problem people face is the lack of information about EPF forms. For different functionalities, there are different types of forms. You may want to register, make withdrawal or take advances from an EPF account via forms. Now question is which form is mandatory for particular action. This section is about various types of EPF forms created for different circumstances.

EPF forms are divided into following three broad categories:

  1. EPF claim forms
  2. EPF registration forms
  3. EPF return forms

Form 31 (EPF Advance Withdrawals)

Premature withdrawals are restricted when it comes to employee provident fund. As this scheme was initiated for long term savings. But in special circumstances, one can make premature withdrawals. For this, the employee needs to submit Form 31.
In following case, the premature withdrawals are allowed:

  • To buy or build a residential house / purchase a plot of land.
  • To renovate the house, specifically making the additions or removing the parts of the house.
  • For the repayment of home loan
  • For the payment of medical treatment
  • To fund the wedding expenses
  • For financing the education
  • To make withdrawal before retirement
  • To make withdrawal if the establishment has been locked down.

Form 14 (Funding an LIC Policy)

An employee can use its EPF account for funding the LIC policy. This service is allowed, if following conditions are met:
⦁ The employee must have finished two years of service
⦁ The employee must sign the declaration stating account balance that can meet payments and premium payments for two years
⦁ The premiums will be paid from the employee’s contribution only

Form 10D (Employee Pension Scheme)

The employees over the age of 58 years with 10 years of service, can use this form to settle their pensions funds. Following pension schemes can be claimed via this form:

  • Disablement pension
  • Orphan pension
  • Superannuation pension
  • Widow & Children pension
  • Nominee pension
  • Reduced pension
  • Dependent Pension

Form 10C (Withdrawal Benefit Under EPS)

The employee can avail the facility of withdrawal benefits under Employee Pension Scheme. In following cases, the application for claim can be made:

  • For the employees over age of 58 years but haven’t finished 10 years of service.
  • For the employees who haven’t finished 10 years of service before turning to age of 58 years.
  • For the employees who have completed 10 years of service before discontinuing the employment below age of 50 years.
  • For the employees who have finished 10 years of service having age between 50 – 58 years, but don’t want to opt for reduced pension.
  • This family or nominee can avail this claim in case of death of employee before completing the 10 years services tenure, after age of 58 years.
  • For the employees, who are members for 180 days or more. Regardless of the period, for which contributions are not applicable.
  • For this claim, you need to fill and submit Form 10C along with required documents.
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Form 13 (Transfer of EPF Account)

The employee has the option of transferring old EPF account to new one. For this task, you need a Form 13. A set of certain rules is followed while making a transfer of EPF account. First of all, the PF contributions are sent to CTO and details to the EPFO. The pension contributions won’t be transferred unless the establishment is exempt from the pension scheme. If the establishment is exempt from pension, PF contributions will be held in the Trust. Otherwise, both will be held with EPFO.

Form 19 (Final EPF Settlement)

The employees can claim the final settlement when they leave the employment, but don’t get involved in any other employment. Before retirement, if employee changes the employment, the EPF transfers will be allowed using Form 13. Otherwise, you need a Form 19.

In the following case, final settlement of EPF account will be carried out:

  1. Retirement
  • Resignation, but did not join any other establishment, which is eligible for EPF scheme.
  • Discharged from the establishment along with compensation under Industrial Dispute Act, 1947.
  • Retrenchment.

2. Emigration to a Foreign Country
In the case of resignation or discharge, a waiting period of 2 months is mandatory before the final settlement of EPF account. An EPF account can stay active for 3 years even without making contributions. The interest will be earned and credited to such EPF accounts. After three years, the account will become inactive.

Form 20 (Final Settlement in Case Employee’s Death)

In case the employee has died, the family or nominee can claim the final settlement by submitting Form 20. Along with Form 20, the requisite forms have to be submitted to claim insurance and pension. The types of forms to be submitted depends on the time of employee’s death.

  • If employee died before turning to 58, while in service, Form 20, Form 10D and Form 51F are required.
  • If the deceased was above 58 years of age, had completed 10 years of service, Form 20, Form 10D and Form 51 are needed.
  • If the deceased was above 58 years of age, had not completed 10 years of service, Form 20, Form 10C and Form 51F are required.

How to Transfer EPF Account Online or Offline?

While in service, the employees contribute to their EPF accounts. When they change the employments, they can either withdraw or transfer the current EPF account. In a case of transfer, the EPF account balance will be transferred from old account to new one. The balance will have interest earned on the contributions made.

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A few years back, the transfer was possible via an offline method. Recently, the government has introduced online channel to transfer EPF account online. Due to convenience, online method is preferred over the offline.

But for your guidance, we have explained both methods right here:

How To Transfer EPF Account Offline?

  • First of all, the employee has to fill and submit the attested Form 13 to the past or current employer. Both past or present employer can attest the form.
  • Now Form 13 will be submitted to regional EPF office associated with the attesting employer. All PF contributions will be sent to the Trust from an old account.
  • Now the old employer has to submit the Annexure K to the regional EPF office.
  • This Annexure K shows the details about service and tenure of the employee.
  • After verification, the PF trust will make the transfer via NEFT.
  • The EPF balance from the old account will be moved to the new one.

How to Transfer EPF Online?

  • First off, the employee should check whether both past and present employer owned digital signatures with the EPFO. Otherwise, you need to use offline method.
  • Now visit the official website of EPFO, here you will find the option for Online Transfer Claim Portal.
  • Next you have to click on eligibility to file or transfer claim online.
  • To check eligibility for Online Transfer Claim Portal, you need to submit PF details, i.e. old and new EPF account details.
  • If you have registered the account, log in with your member ID. Otherwise, register yourself to get login details.
  • You will be directed to Online Transfer Claim Application.
  • Under the “Claim” button in the menu, click on request for an account transfer.
  • Now you will see three subforms Part A, Part B and Part C of Form 13.
  • Part A includes personal details.
  • Part B demands details about old EPF account.
  • Part C requires details about current EPF account.
  • Now click on the form/claim attested by the old or present employer.
  • Preview the form for final changes and proceed.
  • You will get the PIN on provided mobile number. Enter the PIN and accept the declaration.
  • Now print out the form to sign and submit for attestation to the chosen employer.
  • The employer will verify the form on the portal.
  • Once the verification is finished, the EPFO will transfer the EPF balance to a new one.

Final Verdict

Hopefully, this comprehensive guide on Employee Provident Fund proved to be helpful for you. EPF is popular long term saving scheme in India, which comes with insurance and pension benefits. But people have so many questions about this scheme. We made sincere effort to provide necessary information for people who are looking for such answers. In case, you have any question related to EPF; please feel free to share with us!

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