What is Employee Provident Fund?• A provident fund is created with a purpose of providing financial security and stability to elderly people.• It’s purpose is to help employees save a fraction of their salary every month, to be used in an event that the employee is temporarily or no longer fit to work or at retirement.
• Employees Provident Fund Organisation (EPFO) is one of the largest social security organizations in the world in terms of members and volume of financial transactions undertaken.• EPFO is a statutory body of the Indian Government under Labor and Employment Ministry.
The Constitution of India under“Directive Principles of State Policy”provides that : the State shall within the limits of its economic capacity make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved want.
The Employees’ Provident Funds & MiscellaneousProvisions Act, 1952 was came into force w.e.f. 4thMarch,1952. Presently, the following three schemesare in operation under the Acts:1. Employees’ Provident Fund Scheme, (EPS)19522. Employees’ Deposit Linked Insurance Scheme,(EDILS) 19763. Employees’ Pension Scheme, 1995 (replacing the Employees’ Family Pension Scheme, 1971 (EPS)
Pension Schemes of EPFOFamily Pension Scheme 1971 (FPS-71). If member is alive, no pension If member is not alive , pension to spouse only Pension amount was also very small as the contribution collected to the scheme is only 3.34% (1.67%x2) of the Wages This scheme ceased when the EPS-95 came into existenceEmployees Pension Scheme 1995 (EPS-95). If member is alive, pension to member If member is not alive, Pension to to spouse and two children below 25 years of age This scheme is applicable to all members who joined EPF after 15.11.1995
Employees’ Pension Scheme (EPS) of 1995 offers pension on disablement,widow pension, and pension for nominees.It is financed by diverting 8.33 percent of employer’s monthly contributionfrom the EPF(restricted to 8.33% of 6500 or Rs. 541) and government’scontribution of 1.17 percent of the worker’s monthly wages.The purpose of the scheme is to provide for1) Superannuation Pension: Member who has rendered eligible service of 20years and retires on attaining the age of 58 years.2) Retiring Pension: member who has rendered eligible service of 20 years andretires or otherwise ceases to be in employment before attaining the age of 58years.3) Permanent Total Disablement Pension4) Short service Pension: Member has to render eligible service of 10years and more but less than 20 years.
Employees Deposit Linked Insurance Scheme (EDLIS)• Under the EDLI scheme life insurance cover is provided to the PF members.• The cost of the scheme is borne by the employer but amount of life coverage under this statutory scheme is very low (a maximum amount of Rs. 60,000)• Usually employers opt out of the EDLI scheme by going for group insurance scheme which usually provides higher coverage to employees without any increase in cost to the employer.• EPF, EPS and EDLIS are calculated on Basic Salary, Dearness allowances(DA), cash value of food concession and retaining allowances if any.
Table below gives the rates of contribution of EPF,EPS, EDLI, Admin charges in India. Employee EmployerScheme Name contribution contributionEmployee provident fund 12% 3.67%Employees’ Pension scheme 0 8.33%Employees Deposit linked insurance 0 0.5%EPF Administrative charges 0 1.1%EDLIS Administrative charges 0 0.01%
• Employees drawing basic salary upto Rs 6500/- have to compulsory contribute to the Provident fund and employees drawing above Rs 6501/- have an option to become member of the Provident Fund.• It is beneficial for employees who draw salary above Rs 6501/- to become member of Provident Fund as it is deducted from the salary before it is deposited on bank or given hence compulsorily saving happens.• Employee’s contribution is matched by Employer’s contribution(till 12%) so extra money and it is helpful for tax purpose too.• The employer contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act.
Calculation of Employees Provident Fund Contributions Basic salary of Rs 3500 i.e. less than Rs 6500Contribution Towards Calculation AmountEPF Employees share 3500 x 12% 420EPS Employer share 3500 x 8.33% 292EPF employer share 3500 x 3.67% 128EDLI charges 3500 x 0.5% 18EPF Admin charges 3500 x 1.1% 39EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)
Calculation of Employees Provident Fund ContributionsHighest contribution method : Total deposited Rs. 1921.75 (Adopted by LWIN) Basic salary Rs. 7500 i.e. above Rs 6500 Method-1Contribution Towards Calculation AmountEPF Employees share 7500 x 12% 900EPS Employer share 6500 x 8.33% 541EPF employer share 7500 x 12% (-) 541 359EDLI charges 7500 x 0.5% 38EPF Admin charges 7500 x 1.1% 83EDLI Admin charges 7500 x 0.01% 0.75 ( Round up to Rs 1/-)
Calculation of Employees Provident Fund Contributions Total Deposited Amount : Rs. 1785.65 < Rs. 1921.75 Basic salary Rs. 7500 i.e. above Rs 6500 Method-2Contribution Towards Calculation AmountEPF Employees share 7500 x 12% 900EPS Employer share 6500 x 8.33% 541EPF employer share 6500 x 3.67% 239EDLI charges 6500 x 0.5% 33EPF Admin charges 6500 x 1.1% 72EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)
Calculation of Employees Provident Fund Contributions Total Deposited Amount : Rs. 1665.65 < Rs. 1785.65 < Rs. 1921.75 Basic salary Rs. 7500 i.e. above Rs 6500 Method-3Contribution Towards Calculation AmountEPF Employees share 6500 x 12% 780EPS Employer share 6500 x 8.33% 541EPF employer share 6500 x 3.67% 239EDLI charges 6500 x 0.5% 33EPF Admin charges 6500 x 1.1% 72EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)
Interest on the PF accumulations• Compound interest as declared by Central Govt. is paid on the amount standing to the credit of an employee as on 1st April every year.• The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees.
How would I know the amount of accumulations in my PF account ?• PF annual statement gives details about the PF accumulations.• This statement is sent by the PF department on completion of the financial year.
How would I know the amount of accumulations in my PF account ?
Is it also possible to check the EPF Account balance online?www.epfindia.com/MembBal.htmlYou will get SMS alert from EPFO :EE amount : Rs XXXXX and ER amount Rs:XXXXX ason <Today’s Date>(Account updated upto Date).• EE = Employee Contribution and ER = Employer Contribution on date(shown in Account updated date) mentioned in your SMS.• It does not show current balance of PF Account as on Today
Which form has to be filled while becomingmember of provident fund?To become a member of the EmployeeProvident Fund one has to fill• Form 11 and• Nomination Form (Form 2 Revised).
Can I voluntary contribute more than the statutorylimit to EPF?• Additional amount (over and above 12%) to Provident Fund can be deposited by depositing VPF (Voluntary Provident Fund).• However, employer is not bound to do a matching contribution. The employer is liable to pay contribution only on 6500 whatever is the basic salary.• This is called voluntary contribution and a Joint Declaration Form needs to be filled up where the employer and the employee both have to give a declaration as to the rate at which PF would be deducted.
Pension BenefitsA employee can start receiving the pension under EPS onlyafter rendering a minimum service of 10 years andattaining the age of 58/50 years.After 50 Years and before 58 years early pension is payablesubject to discounting factor @ 4% for every year fallingshort of 58 yearsIn case of death / disablement, the above restrictionsdoesn’t apply.
Retirement Age as per PF Rules:• In Employees Pension Fund Scheme, the age is 58 years. But for Provident Fund no age is fixed. That means, an employee who has attained the age of 58 ceases to be a member of Pension Scheme.• At the same time, if an employee joins an organization after 58 years (as there is no retirement age in private sector unless otherwise provided in the Standing Orders) and if such an employee had not been a member of Employees Provident Fund earlier, then he will be covered and he has to contribute to PF.• In such cases, the employer will contribute the entire 12% to his EPF account and not as 8.33% to Pension Fund and the remaining 3.67% to Provident Fund. In the similar way, if a member of provident fund who has withdrawn his PF accumulations on attaining the age of 58 and or who is in receipt of pension from the Employees Provident Fund Organisation, joins a company, he will be exempted from contribution.
Pension BenefitLifelong pension is available to the member and upon his deathmembers of the family are entitled for the pension.The monthly retiring pension is decided on the basis of‘Pensionable Service’ and ‘Pensionable Salary’ and is worked outas followsMonthly pension = ( Pensionable salary*Pensionableservice)/70• Pensionable Salary is the average contributing salary immediately preceding 12 months from the date of exit from the scheme, normally this would be limited to Rs 6,500 p.m.• Pensionable Service cannot exceed 35 years
The amount of pension is meager.If one would have invested Rs 541 in arecurring deposit at the rate of 8% for 35years one would get 12,49,263 as maturityamount.If this maturity amount is put in buying thePension plan and put the above amount Rs12,49,263 with option as Annuity payable forlife, one would get montly pension of Rs10,150 which is much more than Rs 3,250.
Less Known EPF Rules1: You can also nominate someone for your EPF • One very strange rule as per the Act is that you can’t nominate your brother for EPF.
Less Known EPF Rules 2 : No interest is given on EPS (pension part)
Less Known EPF Rules 3: You might not get 100% of your EPF moneyyou always get 100% of your EPFpart, but for EPS there is separate rule. There is something called Table‘D’ , under which its mentioned howmuch you get at the time of exit fromyour job, there is a slab for eachcompleted year and you get n times ofyour last drawn salary (depending onthe completed year of service) subjectto maximum to Rs 6,500 per month.So if your salary in this case was Rs30,000 per month, still you will begiven only 6,500 * 6.40 = Rs 41,600.
Less Known EPF Rules4: Withdrawing of EPF amount at job change is illegalYou can only withdraw your EPF money only if youhave no job at the time of withdrawing EPF and if 2months have passed. Only transfer is allowed in caseyou get a new job and you switch to it.For your information you should know that if you got anew job and took it and then you are applying forwithdrawal, its illegal as per law.
Less Known EPF Rules5: One can opt out of EPF if he wantsIf one’s basic salary per month is more than Rs 6,500,he has an option to opt out of EPF and not be part ofit. In which case he will get all his salary in hand(without anything deducted every month).If a person has been part of EPF even once in his life,then he cant opt out of it.
Less Known EPF Rules6: Your EPF gives you some life insurance too• Your organisation has to contribute 0.5% of your monthly basic pay, capped at Rs 6,500, as premium for your life cover under Employees’ Deposit Linked Insurance (EDLI) scheme.• The bad part of this EDLI scheme is that the life cover under this option is very low and that’s maximum amount of Rs. 60,000.• For employees in small scale industries and small cities, this amount of Rs 60,000 will still count something.
Less Known EPF Rules 7: You can use EPF money can be withdrawn at special occasions1. Marriage or education of self, children or siblings- You should have completed a minimum of seven years of service.- The maximum amount you can draw is 50% of your contribution- You can avail of it three times in your working life.- You will have to submit the wedding invite or a certified copy of the fee payable.
Less Known EPF Rules7: You can use EPF money can be withdrawn at special occasions2. Medical treatment for Self or family(spouse, children, dependent parents)- For major surgical operations or for TB, leprosy, paralysis, cancer, mental or heart ailments- The maximum amount you can draw is 6 times your salary- You must show proof of hospitalization for one month or more with leave certificate for that period from your employer.
Less Known EPF Rules 7: You can use EPF money can be withdrawn at special occasions3. Repay a housing loan for a house in the name of self,spouse or owned jointly- You should have completed at least 10 years of service.- You are eligible to withdraw an amount that is up to 36 times your wages.4. Alterations/repairs to an existing home for house inthe name of self, spouse or jointly- You need a minimum service of five years (10 years for repairs) after the house was built/bought.- You can draw up to 12 times the wages, only once.
Less Known EPF Rules7: You can use EPF money can be withdrawn at special occasions5. Construction or purchase of house or flat/site orplot for self or spouse or joint ownership- You should have completed at least five years of service.- The maximum amount you can avail of is 36 times your wages. To buy a site or plot, the amount is 24 times your salary.- Can be avail of it just once during the entire service.
Withdrawal or Transfer of Employee Provident Fund• Legally it is mandatory to transfer EPF Account at the time of job change. But, people generally don’t do it; instead of transferring, they withdraw the amount.• In case of EPS, if the service period is less than 10 years, you’ve option to either withdraw your corpus or get it transferred by obtaining a ‘Scheme Certificate’. Once, the service period crosses 10 years, the withdrawal option ceases.
An EPF account holder can withdraw amaximum of 90% of his EPF balance betweenthe later of the two—(a) He has attained 54 years of age; or(b) 1 year remaining for his actualretirement.In any of the above two cases, application hasto be submitted to the Provident Fund Officein claim form number 19.
Tax implications, if I withdraw the EPF balance at the time of aJob change?In case you are a member of recognized provident fundit depends on if contribution is over 5 years or not,including transfers from different companies.• An employee who has worked with X company for say 3 years, then he resigned from that organisation and joined Y company, wherein he worked for 2 years, then resigned from there to join establishment for 2 years but during these 7 years of service he has not withdrawn but transferred his Employee provident fund, then we say continuous service of 7 years.
Tax implications, if I withdraw the EPF balance at the time of a Job change?• If you withdraw before completing a period of 5 years, then all your previous years income gets recomputed as if the fund was unrecognized from the very beginning (i.e., the tax benefits you received on your own contribution u/s 80C/88 in earlier years will get forfeited) and further the employer contribution and interest received will be added to your current income• So the next time you think of withdrawing your PF, you must as an individual also assess whether the same is taxable or exempt.
Are Withdrawal of EPF and EPS related?• EPS and EPF are not linked .• You can withdraw the PF once you leave the organization after filling Form 19.• In case of EPS, if the service period is less than 10 years, you’ve option to either withdraw your corpus or get it transferred by obtaining a ‘Scheme Certificate’.• Once, the service period crosses 10 years, the withdrawal option ceases .• For pension, withdarwal benefit, scheme certificate etc. application should be through ex-employer.
Transfer of EPF account• When an employee joins a new company and he wishes to transfer his previous company provident fund amount, he should inform the HR department or Accounts department of the new company.• The employer will issue Form 13, in which the member has to fill the details of the previous company like – name, address, provident fund account number and address of the provident fund office where the account was held.• On Form 13, the signature of the previous employer is not required.
Transfer of EPF account• Once he fills the required details and submits it to the current employer, the current employer will forward it to the provident fund office for the transferring process. The new regional PF office then gets in touch with your previous regional PF office to effect the transfer.• The time taken for transferring the fund from one account to other account normally takes about 30-40 days from date of submission.
What are Problems Faced in withdrawing /transferring EPF/EPSand the remedies.Some of the normal reasons for the problems arequoted here below:• Mismatch of Signature of the employer• Mismatch of Signature of the member• Mismatch of Provident Fund Account number of the member• Incorrect bank account details furnished by the member• Incorrect address given by member• Mismatch of date of joining / resignation• Communication from PF department while processing the request would not have reached the employer• Failure of employer to remit the PF amount recovered from members to PF Account• Member might have changed his / her official name and the same has not been informed to the provident fund office• Change in Authorised Signatory of the employer when the application is in process
What if EPF is not transferred?• The good news is that even if you don’t transfer your previous balance, your previous accounts are live and accessible. You can withdraw or transfer the balance to your current PF account• However, remembering your employer and your EPF number may not be easy. So, keep all EPF slips.
“After a considerable waiting period,EPFO (Employees’ Provident FundOrganisation) will transfer funds to anunclaimed deposit account. Your fundswill not earn interest during that period.A better strategy is to remember totransfer your account at the time ofchanging jobs.”
RTI for EPF Withdrawal and Transfer issue• One can file a RTI (Right to Information) if one is unclear about what your EPF status is or if one’s EPF transfer work has even started? Why did one’s EPF money still not credited in bank account etc etc…• You can ask all these questions and you should be getting the 100% right and clear answers within 30 days. The only point here is that you should be doing it the RIGHT way.
Before filing the RTI , a good ideawould be to file a :EPF grievance redressal form onlinehttp://epfigms.gov.in/
File RTI in 3 easy stepsStep 1: Buying a Postal Order of Rs 10 from Post Office• It should be in favor of Accounts Officer of the Concerned EPFO Office. Like if you are sending your EPF letter to Bangalore, the Rs. 10 postal order should be in favor of Accounts Officer, EPFO, Bangalore. The fees can also be paid by demand draft, but that would be expensive, better go for Postal order as it is commonly used for RTI.Step 2: Drafting your RTI letter• The first step is to draft RTI letter for your EPF related queries. All you need to do is write a letter on a normal paper (better take a very high quality A4 size paper). Though there is no specific format for RTI application letter, still there are some rules of drafting it.• The letter subject should start as ”Application Form for Seeking Information under RTI Act 2005″• The letter should be addressed to Central Public Information Officer, Employees’ Provident Fund Organisation, (Provide Concerned PF office address). Refer to this EPFO directory for exact address of PF office for your jurisdiction.
File RTI in 3 easy steps• Make sure you mention your Name, Address, Contact telephone number and your Email id along with EPF account number.• Now, put all your queries which you want to ask regarding your EPF (putting them as bullet points is recommended)• As a next thing, you should have a declaration - ”I do hereby declare that I am a citizen of India. I request you to ensure that the information is provided before the expiry of the 30 day period after you have received the application”• Finally at the end of the letter, mention the proof of payment of fees as - Proof of payment of application fee: Attached Indian Postal Order for Rs. 10 /- dated dd/mm/yyyy favoring “Accounts Officer of EPFO” as application fee.• And complete the letter by putting your Signature, Place and Date.• Sign the letter and Put your Postal address• Mention the payment details like Postal order number, issuing post office, date, cash receipt details, etc., towards the end of your application• Following is a sample RTI letter.
File RTI in 3 easy stepsStep 3 : Send the RTI letter by Registered Post or Speed Post• The final step is to send this RTI letter by Registered post only, as no courier is accepted. Please make sure you keep the acknowledgement receipt carefully for all the future communication (if any). It might be required by you.• Once you complete the 3rd step, the RTI letter should reach the concerned authority in few days and then within 30 days you should be getting the reply within 30 days (as per RTI act).When you file an RTI application, there are some important pointswhich you should remember depending on different state (viz.applicable fee, length of application, content type etc.), because incase you don’t take care of legal critical points, it would meanrejection of your application and unnecessary work again.
• The employer should forward claim forms to PF authorities within 5 days of its receipt (Ref clause 72 5(a) of EPF Act.)• Usually companies adopt their own internal HR system that they compile all applications/forms of withdrawal and submit to concerned PF office twice a month on specific dates.• The PF office should be in a position to settle the claim within 30 days and credit the amount in bank a/c of the member in say 45 days.• Redressal of grievance is within 30 days.• You may obtain signature & seal of Astt. Commissioner of Labour or Govt Labour Officer or Gazetted officer (in place of employer, signature of gazetted officer is required in case of a closed establishment), Manager of a bank, Member of the Central Board of Trustees./committee/Regional Committee (Employees’ Provident Fund Organization), Magistrate/Post/Sub Post Master/ President of Village Panchayat/Notary Public and submit the same to RPFC, with a letter as mentioned above.