Employee Provident Fund (EPF) is a provision given to all employees in a corporate organization by the Employees' Provident Fund Act (1952). 

It is essentially a retirement benefits scheme where an amount from the employee's monthly payment is deposited in a fund. 

The employer also contributes an equal amount to the account. 

The plan is governed by the Employees' Provident Fund Organization (EPFO).

The EPF extends to organizations with 20 or more people unless unique circumstances arise for smaller companies.

The employee must adhere to the EPF scheme rules if their income is under Rs. 15,000 a month.

For employees with a salary exceeding Rs. 15,000 can enter the scheme with his employer if the Assistant PF commissioner permits it.

Employers can themselves contribute higher to the EPF amount, which falls under the Voluntary Provident Fund (VPF).

How to withdraw money from EPF?

The amount accumulated in EPF is withdrawn only when the employer retires from employment at 55 years of age. They receive the net amount contributed along with interest.

The Act allows employees nearing retirement age at 54 years of age to withdraw 90% of the EPF amount along with interest.

If Unemployed

Employees out of work for a month can also draw 75% of the total amount and the remaining 25% if they are unemployed for straight 60 days.

 

UAN

EPFO allows access to one’s EPF during employment in the form of ‘advances.’ These are allowed under particular situations such as paying medical bills, buying a house, education, marriage, etc.

Withdrawal is now fulfilled with the UAN based Form 19, which nullifies the employer signature requirement.

However, for availing of this benefit, they must hold a valid UAN and complete their KYC details with the bank.

UAN is mandatory for all employees now and helps manage the transactions oriented to the EPF account.

Form No. 11

Employees need the ‘New Form No. 11 – Declaration Form’ to furnish the existing UAN.

For workers switching jobs during their careers can withdraw 75% of the PF amount if they are unemployed for a month, as previously stated.

Tax on EPF

EPF withdrawals have tax implications if drawn before the completion of five continuous years of work. The amount becomes taxable in the withdrawal year.

Tax Deducted at Source (TDS) discourages employees from withdrawing prematurely and enable long-term savings. The standing rate for TDS is 10%.

The EPF for private-sectors employees depends on their base salary. With increasing pay, they are eligible for a higher PF.

The objective behind the EPF Act is to support employees after retirement. It ensures they have a lump-sum amount saved for their expense when they do not work anymore.

 

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