EPF — Employees’ Provident Fund

What is EPF — Employees’ Provident Fund 

The Employees Provident Fund (EPF) is a savings program initiated by the Employees Provident Fund Organisation and overseen by the Ministry of Labour and Employment, Government of India. Its primary purpose is to encourage salaried employees to develop savings habits and create a substantial retirement fund.

Introduced in 1951, the EPF scheme serves more than fifty million individuals. It operates under the governance of The Employees’ Provident Scheme Act 1952, the Employees’ Direct Linked Insurance Scheme Act 1976, and the Employees’ Pension Scheme Act 1995.

Within this scheme, both the employer and employee make contributions to the fund, and interest accrues on the invested amount at regular intervals. The accumulated savings become accessible to the employee upon retirement or when leaving their job, subject to specific conditions. These schemes are available to Indian workers, and workers from countries with bilateral agreements with India are also eligible. In the unfortunate event of an employee’s demise, their dependents are entitled to the benefits of the scheme.

EPFO (Employee Provident Fund Organisation) The EPFO is an extralegal entity responsible for overseeing and supervising provident funds in India. It holds the distinction of being the largest global social security organisation in terms of both financial transactions and its customer base.

Operating from 138 different locations nationwide, this organisation maintains a dedicated training infrastructure. Here, its officers, employees, and employer and employee representatives participate in various workshops, training programs, and seminars.

Schemes Offered Under EPFO 

The EPFO provides the following schemes:

1. 1952 Employee Provident Fund Scheme (EPF)
2. 1995 Employee Pension Scheme (EPS)
3. 1976 Employee Deposit Linked Insurance Scheme (EDLI)
4. Universal Account Number (UAN)

Objectives of EPFO

The key goals of EPFO include:

1. Ensuring that all organisations comply with EPFO’s rules and regulations.
2. Digitising provident fund services to enhance user convenience and efficiency.
3. Simplifying compliance processes and promoting voluntary adherence.
4. Protecting investors’ rights and reducing the time it takes to settle claims to just three days.
5. Guaranteeing that each employee possesses a single EPF account and granting online access to each account.

Eligibility to be a member of EPF 

The EPF scheme has specific eligibility criteria, which are as follows:

1. All states in India, except Jammu and Kashmir, are eligible to benefit from the provisions of the EPF scheme.
2. Salaried employees earning up to ₹15,000 are required to register for an EPF account.
3. Employees with a salary exceeding ₹15,000 can register for an EPF account, but this is subject to approval from the Assistant PF Commissioner.
4. Organisations with over twenty employees are obligated to enrol in the EPF scheme.
5. Organisations with fewer than twenty employees have the option to join the EPF scheme voluntarily.

EPFO Services 

EPFO is committed to digitalising its services for improved operational efficiency. It offers a range of online services:

1. Online Registration: Employers can register establishments online, streamlining the process and enhancing the employee experience.
2. PF Contribution: Organisations can make online contributions through select banks in partnership with EPFO.
3. PF Withdrawal: Employees can conveniently withdraw PF online via UAN, provided they link their Aadhaar and bank details. Withdrawal is permissible after two months of unemployment.
4. Claim Status: Employees can track their claim status and download their EPF passbook using UAN.
5. EPF Transfer: Transferring funds from a previous member ID to the current one is now hassle-free and online through UAN.
6. Exempted Organisations: Exempted establishments can file monthly returns using an IT tool provided by EPFO.
7. International Employees: EPF members working in countries with Social Security Agreements with India can generate Certificates of Coverage (CoC) online.
8. Inoperative Accounts: EPFO has an online helpdesk to track and manage dormant, inactive accounts which don’t accumulate interest.
9. UMANG App: EPFO’s mobile app, UMANG, allows UAN holders to access various services, including the EPF passbook and profile updates.
10. SME Service: Members with activated UAN can check their PF balance, contributions, and KYC status via SMS or missed call. Employers receive alerts for non-payment of EPF.
11. Grievances: EPFO prioritises grievance resolution, offering an online complaint platform with a quick turnaround time. 

EPF Calculation 

The EPF calculator is an online tool that estimates the potential value of your EPF investment upon retirement. This lump-sum calculation takes into account your contributions, your employer’s contributions, and the accrued interest on the total investment.

To use the EPF calculator, you need to input certain details such as your current age, monthly salary, dearness allowance, EPF contributions, retirement age, and, if available, your current EPF balance. Utilising a predefined formula, the calculator then provides an estimate of the future value of your EPF investment.

The primary purpose of this calculator is to assist employees in their financial and retirement planning. It enables individuals to explore various scenarios and combinations to determine the desired EPF fund for their retirement.

EPF Benefits 

Here are some of the EPF’s key benefits:

1. EPF permits employees to access advances or make withdrawals during emergencies.
2. In the event of a member’s death, the PF amount is payable to their nominated beneficiaries or legal heirs.
3. EPF encourages employer contributions to the PF and promotes contributions to the employee’s pension, ensuring financial security post-retirement.
4. Crucially, both employer and employee contributions to the provident fund qualify as income tax deductions, and the interest earned on the investment is tax-exempt.
5. Employees receive an attractive interest rate on their PF investment, which is virtually risk-free.
6. Through the EDLI scheme, employees are eligible for life insurance coverage in the event of death while in service.
7. EPFO allows for easy transfer of funds in case of job changes, without any exit charges or impact on the total investment value.

EPF Tax Rules

The tax regulations concerning the Employee’s Provident Fund changed in the fiscal year 2022, as announced in the government’s Budget for 2021. Before that, the interest on EPF deposits and the deposits themselves were exempt from taxation. However, the new rules stipulate that any interest earned on VPF (Voluntary Provident Fund) and EPF deposits exceeding ₹2.5 lakhs in a single financial year will be subject to taxation. It’s important to note that if no contributions are made to the account, the interest component is exempted up to a deposit of ₹5 lakhs in the financial year. Consequently, the Central Board of Direct Taxes (CBDT) has mandated the maintenance of two separate PF accounts to facilitate compliance with these regulations.

Conclusion

The EPF scheme plays a pivotal role in fostering financial security and savings habits among employees while offering attractive tax benefits. It serves as a crucial component of India’s social security framework.

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