Employee provident fund is the scheme under which an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer. Members of EPF has the facility of transferring their claims both online and offline.
The establishment that is employing more than 20 people is covered under the scheme subject to certain conditions and exemptions even if they employ less than 20 persons each.
Features of EPF Scheme
1. Contribution by both employer and employee – An employee pays 12 percent of the basic wages plus dearness allowance and retaining allowance. The employer also pays a similar amount. For establishments that employ less than 20 employees or meet certain other conditions as notified by the EPFO, is restricted to 10 percent.
2. Higher Voluntary Contribution by an employee or Voluntary Provident Fund – Employees can pay a higher contribution towards Voluntary Provident Fund which is accounted for separately. An added feature of this scheme is that it earns a tax- free interest.
3. Withdrawals from the EPF account – After retiring from the service attaining an age of 55 years of age, the final PF settlement is done. The total EPFO Members balance includes both the employee’s and employer’s contributions along with the accrued interest.
However, there is a window to partially withdraw the amount for those nearing retirement. Anyone who has crossed 54 years of age can withdraw up to 90 percent of accumulated balance with interest.
4. Interest on account – The interest on EPF is calculated on the basis of the monthly running balance.
5. UAN – UAN is the number allotted to an individual by EPFO. UAN will help the member to view all of the Member Identification Numbers (Member ID) linked to it. It is mandatory for all employees which helps in managing the EPF account and even PF transfer and withdrawals will become much easier than before.
6. Five years of continuity of service and its importance – In early and mid-years of their careers, employees tend to switch jobs. Employees can either withdraw 75% of EPF corpus after waiting for one month if unemployed and make a complete withdrawal after remaining unemployed for two months or transfer the balance to the new employer.
7. Tax on early withdrawals – Withdrawing the PF balance without completing five continuous years of service has tax implications. The government has introduced TDS at source on PF withdrawals in order to discourage premature withdrawals and promote long term savings.
8. Availing advances – If your UAN is activated and seeded to your bank account, you don’t have to even go through your employer to get hold of your EPF.
The claim can be submitted online on the Member-e-Sewa portal, provided Aadhaar is linked to UAN.
9. Special advance scheme for housing – All contributory employees has been allowed by members of the provident fund (PF) scheme to use 90 percent of EPF accumulations to make down payments to houses and pay for home loans.
10. Employees’ Provident Fund – Contribution’s towards Employees’ Provident Fund are meant to take care of one’s post-retirement needs. These advances are allowed only under specific situations- buying a house, paying the fees of the education or marriage of children, medical needs, etc. Employer's need not pay any interest on such advances as it is not a loan.
FAQs related to EPF
1. What is an EPF scheme?
Employee Provident fund is a scheme where both employer and employee contribute a certain percentage of the salary.
2. Does my employer also contribute to my EPF account?
Yes, as per the EPF rules, an employer also has to contribute to his/her employee’s account. As per the scheme an employer has to contribute 12 % of the salary of an employee.
3. Can I contribute a higher amount to my EPF account?
A higher amount of contribution can be done via the Voluntary Provident Fund. The rules regarding both VPF and EPF are the same. The interest earned is also exempted from tax.
4. Will the contribution be continuing to EPF even if one stops working?
As per the rule laid out by EPFO, one cannot contribute to the EPF account once they stop working. Under this scheme any contribution by the member must be matched with the employer’s share of contribution.
5. Is UAN mandatory?
Yes, UAN is mandatory to submit online claims.
6. Is UAN linked with the PAN of the employee?
Yes, the UAN is linked with the PAN.
7. How a UAN is allotted ?
The Employee Provident Fund Organization (EPFO) allocates UAN when an employee subscribes to the EPF.
8. Is it possible to have two UAN’s ?
No, an employee can have only one UAN which is transferable across all eligible employers.
9. Will employers withhold EPF balance when changing jobs ?
No, the EPF accounts are linked with the UAN which is transferable across all eligible employers.So no employer can withhold EPF balance of employees when they change jobs.
Advantages of UAN to employees
• Any time you want a PF statement(visa purpose, loan security etc) you can download one instantly. It can be done either by logging in using the member ID or UAN which is already linked to Aadhaar and KYC-verified.
• Having a UAN has multiple benefit. It ensures employers cannot access or withhold the PF money of their employees.
• Having a UAN is already Aadhaar and KYC-verified.
• Online withdrawal is easier with this number.
• Having a UAN number makes the depositing of the contribution easier