Employee Provident Fund is a social security scheme implemented by Employees Provident Fund Organisation of India (EPFO) for the employees. The main purpose of EPF is to promote savings for professionals working in the service sector. More than 7 crore people are enrolled under EPF in India. Employee Provident Fund (EPF) is one of the largest social security organizations in the world with respect to the members enrolled and the volume of financial transactions undertaken. Have a look at following 10 Most Important things you must be aware if you have your PF Account:
1. EPF Applicability
Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 is administered by Employees Provident Organisation under the ministry of Labour and Employment. According to this Act, all establishments which employ 20 or more employees are obliged to extend the coverage of PF Scheme to its employees. It is compulsory for all employees whose Basic Salary + DA (Dearness Allowance) is less than 15,000 per month.
2. EPF schemes
There are 3 schemes under EPF:
- Employee Provident Fund, 1952: EPF provides financial security and stability to the employees. The provisions of Employees’ Provident Fund Scheme is applicable to an establishment which is involved in an activity of manufacturing goods as mentioned under Schedule 1 of this Act and which employs more than 20 people. Schedule 1 of EPF Act, 1952–https://www.epfindia.gov.in/site_docs/PDFs/OLRE_PDFs/PrimaryActivities.pdf
- Employee Pension Scheme, 1995: This EPF scheme is meant to provide old-age social security for employees. So, after the retirement of that person family survives through pension given by the government.
- Employee Deposit Linked Insurance Scheme, 1976: Employees’ Deposit Linked Insurance (EDLI) Scheme was implemented for all employees in order to provide relief to family members in case of sudden death.
3. EPF Interest Rate
EPF has the highest interest rate at 8+%. With the consultation of the central trustee board, Union government decides the interest rate on EPF. The notification regarding rate of interest is available on the EPF website on annual basis.
Universal account number (UAN) is a 12 digit unique number allotted by EPFO to the employee for each of the EPF Account. When a person changes the job EPF account needs to be transferred from old employer to the new employer, UAN makes this process hassle-free also employee can easily transfer his EPF balance. UAN number is used to view the account details at EPF India website. The EPF UAN number acts as a marker of identity for the employee till his/her retirement.
5. EPF Contribution
Under EPF scheme employee and the employer contributes 12% of the basic salary to the EPF account, making total contribution of 24% of the salary. The 12% of employee’s contribution is added towards EPF, while 8.33% out of the total 12% of the employer’s contribution is transferred to the EPS or pension scheme and the balance 3.67% is invested in EPF.
6. EPFO portal
The employee needs to register on the EPFO member portal first using his UAN and create a password. Then he simply needs to login to the EPF account using UAN and avail a number of services such as epfo status, EPF balance check, EPF claim status, EPF withdrawal, fund/account transfer, epfo KYC updating, view EPF passbook etc.
7. EPF withdrawal
The employee can withdraw money only at the time of retirement. However, there are exceptional cases where you can withdraw the amount even before your retirement under certain conditions, such as:
- Marriage or education
- Home loan
- Medical treatment
- Construction or purchase of house
- Loss of income
As per the latest amendment by EPFO, members can withdraw up to75 percent of the balance from their EPF accounts if they have been unemployed for one month. The remaining 25% of the balance can be withdrawn after the second month of being unemployed. Earlier the withdrawal was possible only after being unemployed for a period of two months.
8. UMANG app
UMANG is a new-age Governance Mobile Application; the government has made provisions for employees to avail various services related to EPFO through the epf Umang app. This app provides both employee-centric as well as employer-centric services regarding EPFO. Various other services such as locating establishments, EPFO offices, tracking claim status, account details via SMS, etc. can also be availed using the Umang epfo app. In case you have any query, you can avail the facility of the live chat option provided by the EPFO through the app. Member employees can also link Aadhaar to epf with their UAN through the app.
9. Voluntary Provident Fund
Person can choose to contribute higher than 12% of his basic pay towards EPF by applying for the Voluntary Provident Fund (VPF). For investing in VPF, the employer is not bound to make any contribution. An employee can contribute 88% of the salary to VPF.
10. EPF Tax Exemption
The total amount in the EPF i.e.contribution and the interest are absolutely tax free. If a person withdraws EPF amount after 5 years or after maturity, he is exempted from the income tax payment.
Hope by now you must have understood the importance and various facts related to EPFO. EPF is an effective investment option when planning for retirement, but other options also need to be explored for complete fulfillment of ideal retirement goals.
Registration of establishment with EPFO is the statutory responsibility of the employer. Employers can gain goodwill and social security for its employees through EPFO. At Afleo we offer complete end to end solution for PF Registration for all the employers.
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