All About Employees’ Provident Fund And Its Withdrawal Procedure

Recently, the Employees Provident Fund (EPF) rules were relaxed to enable members of the Employees’ Provident Fund Organisation (EPFO) to withdraw money from their EPF accounts for home loan to purchase property or for construction of the property. Also, they will be able to use monthly PF contributions in part or full towards repayment of home loans.

Here is all that you need to know about EPFO.

What is EPFO?

The Employees’ Provident Fund Organization (EPFO) was founded under the Employees’ Provident Fund Act, 1952. It falls under the Ministry of Labor and Employment, Government of India, for its administrative control. Taking into consideration the huge number of beneficiaries included under this scheme and the number of financial transactions performed EPFO is the biggest social security institution.

At the top of the EPFO is the highest decision-making body. This is the Central Board of Trustees (CBT). The EPFO aids the Central Board of Trustees in ensuring a mandatory contributive Provident Fund Scheme, Insurance Scheme and a Pension Scheme. The EPFO has offices across the country in over 135 locations. This scheme applies to all Indian workers and International workers belonging to countries that have signed a bilateral agreement with India.

The EPFO plays a dual responsibility of an enforcement agent on the one hand to supervise the execution of the EPF Act and a service provider, on the other hand, to the beneficiaries of the act. The EPFO has over 20000 people working at all levels of the organisation. The EPFO aims to provide seamless and problem-free services to the beneficiaries through the following ways.

• Reduce the paperwork and enhance the output.
• Provide trustworthy and seamless online transaction facility.
• Real-time updating of accounts of members every month.
• Make sure that each employee has only a single EPF account.
• Reduce claim settlement time to 3 days from the current 20 days.
• Facilitate and promote compliance.
• Ensure easy access to EPFO to acquire information or search for redressal.

Find out the detailed process to know everything about your UAN passbook.

 Types of EPFO Schemes

The following schemes are covered under EPFO.

1. The Employees’ Provident Funds Scheme 1952 (EPF)
2. The Employees’ Pension Scheme 1995 (EPS)
3. The Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)

See also: Rules for PF withdrawal for house purchase

The Employees’ Provident Fund Scheme 1952 (EPF)

The Employees’ Provident Fund scheme was started in 1952 under the Employees’ Provident Fund Act. The Employees’ Provident Fund is a fund that has a monthly contribution from both employees and employers. This contribution is made at the rate of 12% of the employees’ salary by both the employee and employer. This amount earns interest at a rate decided by the EPFO.

Eligibility Criteria

• Employees must be a member of the scheme to avail its benefits.
• The benefits of the pension benefits, insurance and provident fund benefits are applicable from the day of joining an organisation. Provided the organisation has more than 20 workers employed.
• EPF scheme is however not applicable to the residents of Jammu and Kashmir.

The Employees’ Pension Scheme 1996 (EPS)

The main aim of the Employees’ Pension Scheme is to provide pension to employees of the organised sector to receive pension post-retirement when their age is 58 years. However, to avail the benefits of this scheme, the employee should have worked in the organised sector for a minimum of 10 years.

Eligibility Criteria

• The employee must be a member of the Employees’ Provident Fund organisation.
• He must have completed 10 years of service and should be 58 years of age.
• The employees can draw their pension at a lower rate once they are 50 years of age.

Calculate Pension Under EPS

 Pensionable Salary

Pensionable salary: The average of the monthly salary of the employee in the previous 12 months until the employee leaves the employees’ pension scheme.

 Pensionable Service

It refers to the actual service period. In the case of multiple employers. The period of service under each employer is added for calculating the tenure of pensionable service.

The Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)

The insurance scheme under the EPFO is known as the Employees’ Deposit Linked Insurance Scheme (EDLI). The main aim behind the launch of this scheme was to ensure financial assistance to the family.

Features of EDLI

• The benefits of EDLI scheme can be availed only till the time the employee is a member of the EPF.
• Basic+ Dearness Allowance refers to the average salary per month of the employee.
• To claim the benefits of EDLI, there are no criteria for a minimum period of service to be met.

Both, the employer and employee make contributions to the schemes of the EPFO. The percentage contribution by both the employee as well as the employer is shown below.

How to check EPF balance

You can easily check your provident fund balance through online portal or by giving a missed call or by sending an SMS or through EPF app.

See also: All about PF balance check with UAN number

Checking PF balance using online portal

1. Visit EPFO’s official website. Go to the tab ‘Our Services’ and choose ‘our employees’ from the drop-down menu.
2. Now, check the ‘members passbook’ option under Services
3. You will be redirected to a new page where you have to enter your UAN number and password. You will be able to access your passbook once you are logged in. The session remains active only for 300 seconds. You can also check here your claim status.

How to check PF balance using SMS service

To avail this service, your UAN should be KYC-verified and should Aadhar, PAN Card details linked with it.

Send the message as EPFOHO UAN ENG to mobile number 7738299899. Also, note ENG in above message stands for English language. If you want to receive the message updates in any other language, for instance in Marathi, then type in EPFOHO UAN MAR – where MAR stands for Marathi. Other languages available are Hindi, Punjabi, Gujarati, Kannada, Telugu, Tamil, Malayalam, and Bengali.

Give a missed call to check your PF balance

To avail this service, you have to link your UAN with your KYC details. You need to attempt this service only through your registered number.

Step 1: Give a missed call to 011-22901406 from your registered mobile number.

Step 2: After placing a missed call, you will receive an SMS providing you with your PF details.

Now check your EPF balance on EPFO app

You need to download ‘m-sewa app of EPFO’ available on Google Playstore.

Step 1: Once the app is downloaded, click on ‘Member’ and then go to ‘Balance/Passbook’.

Step 2: Enter your UAN and registered mobile number which will be verified in-app. You can check balance details if the information furnished by you matches the record.

EPFO for Employees

Is it worth it to maximise the amount you save in your EPFO?

In addition to the employee and employer contribution to EPFO, the employee has an additional option to increase the contribution to EPFO via Voluntary Provident Fund  (VPF). By contributing to VPF, the employee gets the same interest on his contribution as he received on EPF and the amount contributed in VPF is valid for deduction in Income Tax under section 80C. This tax-free and risk-free investment option is quite popular with salaried individuals. As it provides them with the comfort to modify their VPF contributions, decreasing, increasing, stopping or starting, the amount twice in a year. Contribution in VPF is a great option for people looking for investment in debt instruments.

Is EPFO transferable as you change your company?

At present, a change in job by an EPFO subscriber requires the employee to file for transfer of EPF in his new organisation. This is required because providing the universal account number (UAN) to the new organisation does not ensure the transfer of EPF contributions and interest earned from the previous organisation. It only makes the new organisation start depositing his new EPF contributions for both employee and employer contribution.

An important point to note here is that if the accumulated EPF amount and interest is not transferred to the new organisation, the amount with interest becomes taxable. However, the amount becomes tax-free if you if the EPF contribution is transferred from the old EPF account to the new EPF account. Another noteworthy point is that once an employee leaves a job, the EPF account with the company becomes inoperative. Although the amount in the EPFO account still gets interest, it is taxable irrespective of whether we withdraw the amount or not.

Should you invest in real estate apart from saving in your EPFO?

 Since a long time, the Employees’ Provident Fund (EPF) has been the trusted and reliable option of salaried individuals for building a retirement corpus. Owing to its tax-free interest and tax deduction benefit under section80C EPF is quite popular. However, with the falling rate of interest, there are various other investment options available too, which can be used along with EPF achieve a growing corpus. One such option that can be considered is an investment in real estate, although this too involves its own set of risks. Investment in real estate involves certain pre-checks to be followed. These include staying patient, doing a thorough research of the property to be purchased, checking all the property papers for genuineness and to ensure the property is free of any prior litigation, make a complete check of the existing market rates, negotiating the rate, etc. Having done the necessary checks investment in real estate yields higher returns than the interest earned in EPF account.

Is your company liable to offer EPFO?

The EPF scheme run by the EPFO under the Employees’ Provident Fund Act, 1952 applies to all organisations employing 20 or more people and in certain cases even if the number of employees is below 20, provided certain terms and conditions are met. Under this scheme, both the employer and employee contribute to the fund, and the employee gets a lump sum amount with interest post-retirement.

As per EPFO, any company which does not comply with the rules of the EPFO will have to bear interest penalty and clear the dues based on the period of delayed payment. If delay in payment is less than a period of two months, the interest charged would be 5 per cent annually over the amount due for the lapse in payment.

• If the delay in payment is for two months or more but lower than four months, the interest charged is 10 per cent yearly.
• If the delay is for four months and more and lower than six months, interest levied is 15 per cent
• If the delay is for six months and more interest charged is 25 per cent yearly

How to liquidate your EPFO?

 Liquidate or withdrawal of EPF is allowed in the scenario where an employee leaves the job or switches the job and is not keen to get the PF account transferred. In this case, Form, 19 is to be filled and submitted for EPF withdrawal. The form can be obtained either from the employer or the EPFI website. Post applying to the regional EPFO office the claim is processed and received by the applicant in three months.

PF withdrawal using Universal Account Number (UAN): In this case, PF withdrawal can be applied with your UAN without the need to take any prior approval of your employer.

Submit PF withdrawal form directly to the regional PF Office: In this case, simply get the PF application form. Post filling the form get it attested by any bank manager, Gazetted Officer /President of village panchayat or magistrate/Sub Postmaster/ Notary Public and submit the form to the PF office for processing the refund. Attestation by Bank Manager is best when the bank is where you maintain your account.

EPF Withdrawal without employer’s approval

With an Aadhaar Card: In this case, the employees must link their Aadhar number to process the EPF withdrawal application without the need to get previous employers’ approval. You must visit the EPFI website and download form19 fill all the relevant and mandatory fields and submit the form.

Without Aadhar Card: In this case, employees must download the form from the EPFO website. Fill the details. Get the attestation from a Gazetteofficer, magistrate. Also, provide an indemnity bond and a stamp paper of Rs100. Along with form attach copies of appointment letter, payslips, Form 19, ID proof, Address proof, id card and submit at the EPFO office.

EPF Withdrawal Procedure: Step by Step

The online process for EPF withdrawal involves the following steps. Follow the steps given below to fill the EPF withdrawal form and initiate a claim online:

Opening the website, login to the UAN Member Portal with the UAN and its password. From the menu bar at the top select ‘OnlineServices’ tab and select claim Form-31. The details of the member will appear on the screen. The member must then enter the last four digits of the bank account and click ‘Verify’. Post this step click ‘Yes’ to proceed further and select the option “Proceed for online Claim” and then select ‘PF Advance (Form 31) to withdraw the funds online. This will be followed by a form wherein select the “Purpose for which advance is required”, employees’ address and the amount required. Check on the certification that follows and apply. Certain scanned documents might be required to be attached with the application based on the purpose of withdrawal selected. Post submission the withdrawal request gets approved by the employer, and after that, the EPF amount is deposited in the account of the member. The various forms used for EPF withdrawal are Form-31 (PF advance), Form 10C (Pension withdrawal) and Form 19 (Only PF withdrawal)

Complete Withdrawal-Form 19

Also known as Final Settlement this form is submitted to withdraw the entire PF accumulated post-retirement.

EPF Withdrawal Rules

EPF can be withdrawn if a person has been unemployed for two months, on retirement, which can be at or after 58 years or in case of death before the age of retirement. If unemployed for two months. There are certain rules which guide the withdrawal process based on the purpose of withdrawal.

• For Medical Purposes:
  • An employee can withdraw his share with interest or the monthly salary of six months subject to whichever is lower.
  • The amount can be used for the treatment of spouse, children, self or parents.
• For Wedding:
  • Withdrawal for marriage of sibling, self or child requires a minimum service of 7 years. Also, 50 per cent of employees contributed amount can be withdrawn under this purpose
• For Renovating and Reconstructing House: 
  • The house should be in the employees’ name or jointly in the name of the spouse and the employee.
  • The employee must have completed at least five years of service.
  • Amount withdrawn can be 12 times the monthly salary.
• Retirement: 
  • On completing 58 years of age, an employee can withdraw the entire provident fund amount.
• Unemployment: 
  • An unemployed person can withdraw 75 per cent of the PF if unemployment is for more than a month and remaining 25percent of the PF can be withdrawn after two months of unemployment.

EPF Withdrawal Rules before five years of Service

In the case of EPF withdrawal before completing a continuous service of 5 years, TDS is deducted. However, if the amount of EPF withdrawal is less than Rs50,000. TDS is not deducted

EPF Withdrawal Rules after Retirement

A member can claim for complete EPF withdrawal when he retires at 58 years of age. The total EPF accumulated amount consists of both employee and employer contribution. Also, this amount is entirely tax-free. However, any interest earned on the EPF amount post-retirement is taxable. On the EPF corpus after retirement is taxable.

EPF withdrawal Rules for home loan repayment

 A member can withdraw up to 90 per cent of the total EPF amount to pay back home loans provided the house is in the name of the member or is held jointly with a spouse. However, to apply for this withdrawal service of at least 3 years is required.

 Is it good to withdraw PF for a home loan?

The main purpose of EPF is to provide consolidated funds to salaried individuals post-retirement that ensures their post-retirement income source. This amount aids in living a decent life in the absence of a regular income. Using that amount for a home loan can put the financial stability post-retirement at risk. There are various banks and financial institutions which provide home loans. However, these loans will not be available post-retirement. So refrain from withdrawing EPF for Home Loan.

How to Apply for Home Loans on EPF

To utilise EPF for paying back the home loan, the member can apply for a loan through the housing society in Annexure 1 to the EPF commissioner. The EPF commissioner then issues a certificate with the details of the monthly contribution in the last 3 months. Based on this, the EPFO then makes the payment.

Tax on Employees’ Provident Fund Withdrawal

• EPF withdrawal, if the employee’s service is not continuous for 5 years, is taxable. In case the employee makes a job shift the new employment period is added to find out the continuous service period. Similarly, if the service period is less than 5 years, the EPF withdrawal is taxable at 10%.

Real Estate Investments VS EPFO. How they differ? And Why both are Necessary?

While investment in EPFO is an accumulated amount which can be accessed post-retirement to cater to a regular income source after retirement. Investment in real estate is not subject to any age or rules. It can be done at any time subject to the availability of funds to invest in real estate. Real estate investment can provide a steady source of income. However, both have their pros and cons and investing in both simultaneously is a good option. 

EPF and International Employees.

The EPFO also covers International Workers (IW) under the EPF act. An International Worker refers to

• A foreign national, in India, working for any employer that is registered with the Employees’ Provident Fund Organization (EPFO).
• Any Indian employee employed in a country which has a reciprocal Social Security Agreement (SSA) with India.

EPF contribution by Indian employees abroad

Indian employees working abroad or IWs, are exempted from making any contribution to the social security schemes of that country if the following two conditions are satisfied.

India has an SSA with the foreign country; and if the IW obtains a Certificate of Coverage (CoC) from the EPFO.

However, in case the employer is a local of the country, the Indian employee gets covered under the foreign country’s laws.

In the case where India does not have an SSA with the foreign country, the Indian employee working there has to make a contribution to both PF in the foreign country and India.

Similarly, for Indian employees who fail to obtain a CoC from the EPFO are required to make contributions to the Provident Fund in India as well as of the foreign country.

EPF contribution of foreign nationals in India

An IW making contributions to the social security system of the foreign country based on the SSA signed between India and the foreign country does not need to contribute to the PF in India. Such a worker is known as ‘detached worker’ under the EPF act.

For employees, working in India, from countries who do not have an SSA with India are required to contribute to PF.

For Employers:

Is it necessary to offer EPFO to your employees?

As an employer in India, any company employing more than 20 people has to offer EPFO to its employees’. And all the schemes and benefits linked to it.

Do you need to invest money in your employees’ EPFO on their behalf?

The employer of a company registered with EPFO must make his share of the contribution or employers’ contribution towards EPF. However, the employer contribution to EPFO is also made from the employees’salary. The employer contribution is divided into following schemes with 8.33% of the contribution towards Employees’ Pension Scheme and 3.67% of the contribution towards Employees’ Provident Fund.

If Your Employee Quits, What Next?

Once an employee quits, he can either withdraw the pf amount or transfer to the next organisation. However, if the employee doesn’t withdraw the accumulated PF amount for 36 months after retiring post the age of 55 years the account is termed inoperative account. As per the existing rules (notified in 2016), a PF account becomes inoperative if the employee does not make an application for withdrawal of accumulated balance in the PF account within 36 months of retiring after attaining the age of 55 years. Also, if there is no credit to the EPF account, the account stops earning interest after three years and the interest earned becomes taxable income
.

How to start EPFO for your employees as a company?

 EPFO applies to any company which has more than 20 employees working for it. In order, the employees reap the benefit of EPFO; the employer must register with EPFO. This process involves the following steps.

The employer must visit the website and, in the portal, register the organisation under the option. ’Establishment Registration’. This will open the page to the Instruction manual. Reading the instructions will guide you to the process of registration. The registration process is followed by getting the DSC(Digital Signature certificate) registered of the employer. Post this another page will open where all mandatory details must be filled.

These can be represented as below.

For Self Employed – EPFO 101

There are certain documents required to complete the registration process. These are shown in the table below.

For entities not mentioned in the table, the documents required are mentioned below.

• The first bill of sale.
• First bill of purchase of machinery and raw material.
• GST Registration Certificate.
• Bank details-These include bank name, branch address, IFSC code.
• Register of salary and wages, all vouchers, all balance sheets from day one to the current date of provisional coverage.
• Salary slip and Statement of PF.
• Crossed and cancelled the cheque.