Provident Fund

All you need to know about provident fund in India

Any salaried employee will have a monthly payment of more than ₹ 15,000 with several deductions listed on their payslip. One of them is for the provident fund. It is a government-managed, mandatory retirement savings scheme in  Singapore, India and other developing nations. The funds received are pooled and held by the government trusts, which produces interest and grows the amount with the help of necessary compound interest and monthly contributions.

How to withdraw EPF?

1. When an employee reaches their retirement age of 58, one will apply to withdraw the provident fund via their employer.

2. Another option is to withdraw from the provident fund before hitting the retirement age. In this case, an employee should have been out of work for a prescribed period by the government, in which case they will be entitled to withdraw 75% of the provident fund. However, it should be remembered that the employer’s contribution from the provident fund can only be removed after age 58. In some cases, a provident fund even pays out to the disabled, who are not in a condition to work.

The Provident Fund scheme is managed under the Employees’ Provident Fund Organisation (EPFO). It is the main part of the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952. It covers all the establishments in which 20 or more people are employed. Under this Saving Scheme, an employee gets a corpus amount including self and employer’s contribution with interest on retirement. To understand the calculation, one should be aware of the following 2 things:

Contribution to EPF

The employee contributes 12% of his or her basic salary along with the Dearness Allowance every month to the EPF account. Out of 12%, the employer must contribute 8.33% , while the remaining 3.67% must be contributed to the EPF.

For  instance, if the basic salary is ₹15,000/month, the employee contribution will be 12 % which comes to Rs 1800/-. Then the employer contribution will be 3.67 % of ₹15,000  which is ₹550.

Therefore, the total contribution to the EPF every month for an employee with Rs. 15,000 salary will will be ₹ 2350

Interest Rate on EPF

Interest is calculated at the end of every month, but it is then deposited into the EPF at the end of the financial year.

Following the above example, if the EPF collected in the first and second month is ₹ 2350, the total amount will be ₹ 4700, and if an interest rate of 8.65/annum is used, then 8.65/12 which is 0.72%, will be applied at the end on ₹ 4700 which is ₹ 33.84. It will keep on increasing as the monthly contributions are added over time. This is how the EPF is calculated manually.

Withdrawal guidelines for EPF

As per the EPF Act, one can claim the settlement after the age of 58. However, a window to partially withdraw is available for anyone over 54 can withdraw up to 90%. As per an amendment on December 6, 2018, one can withdraw 75% of the corpus amount after remaining unemployed for 1 month, and the remaining 25% can be claimed if they remain unemployed for more than 60 days.

To withdraw, one may now use ‘UAN based Form 19’ with the employer signature. This facility is available to everyone with an activated Universal Account Number (UAN). The claim can be submitted online through the Member e-Sewa portal.

When one joins a new organization, the first thing they should do is ask an employer for the ‘New Form No. 11- Declaration Form’ to continue the EPF with the existing UAN. If one doesn’t have it, one can submit the previous PF number and the date of exit from your previous job.

The EPF withdrawal is not taxable if a person has completed at least five years of continuous service. Suppose one has switched jobs in less than five years of continuous service. If a person has changed jobs within five years but transferred the EPF to a new employer, it will be seen as continuous service.

Universal Account Number (UAN)

EPFO allows UAN, which acts as an umbrella for the multiple Member IDs allotted to an individual by different firms. The crucial idea is to link multiple Member Identification Numbers under a single Universal Account Number.  UAN is made mandatory for all employees and will help manage the EPF account. It will  even make PF transfer and withdrawals much easier than in previous times. In most cases, the employer gives the UAN, and the employee has to get the UAN activated by providing all the relevant KYC documents to the employer.

Employees’ Provident Fund Advances:

Employees’ Provident Fund (EPF) takes care of a person’s post-retirement necessities. However, one has to not wait until retirement to access it.  The EPFO allows a person  to access his/her EPF even during the course of his/her employment. Such withdrawals are usually treated as ‘advances’ and not as loans.

Such advances are allowed only under a few specific situations – buying a house, repaying a home loan, medical needs, education. Also, the amount one can withdraw will depend on the specific situation, the years of service, etc. Unlike loan, one is not obliged to repay the advance.

How to check EPF Balance?

There are four methods in which one can check his/her EPF balance:

Using the EPFO portal:

The procedure of knowing your EPF balance through the EPFO member portal is quite easy. One needs to do an EPF login by using your UAN and password. After logging in, one will be able to find the EPF balance under the member ID.

Using the UMANG app:

One can download the Unified Mobile Application for New-age Governance (UMANG) app and perform an EPF balance check on their mobile phone. One can also raise and track claims through this app.

Using a missed call service:

It is possible to check your EPF amount by giving a missed call to 011-22901406 from your registered phone number.

Using an SMS service:

If your UAN is activated, you can send an SMS to 7738299899 for an EPF balance check.