Employees Provident Fund (EPF)

This page provides all the details you need to know about the Employees Provident Fund (EPF) scheme.

 

Table of Contents

 

What is EPF?

EPF stands for Employees Provident Fund. EPF is a retirement and social security scheme for the salaried employees.

EPF is a "Defined Benefits" based retirement scheme in which a fraction of Employee's salary will be contributed to his EPF account. Also, his employer will co-contribute the equal amount for the social security of the employee.

 

EPF History

EPF was started by EPFO (Employees Provident Fund Organisation) back in 1952.

At that time, EPF was the only scheme for salaried class people to save for their retirement life.

 

Objectives of EPF

The main aim of EPF is

  • to help salaried employees to save for their retirement life

  • to provide monthly pension throughout employee's retirement life

 

How does EPF Work?

  • EPF account will be opened for you by your Employer when you join an Organisation

  • 12% of your monthly Basic Pay + DA salary will be deducted and contributed to your EPF account every month by your employer

  • Your employer will make equal 12% contributions into your EPF account every month

  • Your contribution and your employer's contribution will earn interest as per the interest rate (%) announced by the Government of India from time to time

  • At retirement, you can withdraw the entire (100%) accumulated amount from your EPF account

  • After retirement, you will receive monthly pension from EPFO throughout your life

  • After your death, the monthly pension will be given to your spouse followed by 2 children up to their 25 years of age

 

Features of EPF

  • retirement scheme for salaried employees

  • backed by the Government of India

  • safe and Guaranteed returns

  • income tax benefits

  • equal contribution from employer

  • free life insurance cover up to Rs. 6 Lakhs

  • monthly pension after retirement

  • partial withdrawal facility for important life events

 

Income Tax Benefits

Effective 01-Apr-2020, the income tax benefits will depend upon whether you choose old tax system or new tax system.

Old Tax System:

1) Contribution and Interest:

Employee's contribution of 12% of Basic Pay + DA is eligible for tax deduction under Section 80C of Income Tax Act. The eligible limit in a financial year is Rs. 1.5 Lakhs.

Employer's contribution of 12% of Basic + DA is exempted from tax.

Interest earned on employee and employer contribution up to 9.5% annual interest rate is tax free.

Any interest earned above 9.5% annual interest rate will be added to employee's income and it will be taxed under "Income from Salary".

From 01-Apr-2021 onwards, if an employee contributes more than Rs. 2.5 lakhs in a financial year, then any interest earned on the excess amount will be taxed as per the income tax slab rates.

It includes employee's contributions of both EPF and VPF. It doesn't include any of Employer's contributions.

The statement received from the EPFO will have the taxable portion of the interest and it'll need to be declared in your tax returns.

Example:

Let us assume that you are going to contribute Rs. 3 lakhs into your EPF in the FY 2021-22. The interest earned up to Rs. 2.5 lakhs will be tax free. The interest earned on the remaining amount of Rs. 50,000 will be taxed as per your income tax slab rates.

 

2) PF Amount Withdrawn under the following Circumstances will be Completely Tax Free:

Complete (100%) withdrawal of PF amount at retirement.

Employee leaves the job after 5 years of service. To compute 5 years of service, the service provided with the previous employer should also be considered.

Employee leaves the job before 5 years of service due to ill health or dis-continuation of employer's business or reasons beyond the control of the employee.

Employee changes jobs and the PF balance amount with previous employer is transferred to the new employer's PF account.

 

3) PF Withdrawal Amount will be Taxed in the following Manner if You Withdraw before 5 Years of service:

Employee's contribution will be taxed as "Income from Salary".

The interest earned on employee's total contribution will be taxed as "Income from other sources".

Employer's contribution and interest will be taxed to employee as "Income from Salary".

 

4) Monthly Pension:

The monthly pension from EPS after retirement is taxable. It will be considered under "Income from Salary" and it will be taxed as per your income tax slabs.

 

New Tax System:

1) Contribution and Interest:

Employee's contribution won't get any deduction benefits under Section 80C of Income Tax Act.

Employer's contribution of 12% of Basic + DA is exempted from tax.

Interest earned on employee and employer contribution up to 9.5% annual interest rate is tax free.

Any interest earned above 9.5% annual interest rate will be added to employee's income and it will be taxed under "Income from Salary".

From 01-Apr-2021 onwards, if an employee contributes more than Rs. 2.5 lakhs in a financial year, then any interest earned on the excess amount will be taxed as per the income tax slab rates.

It includes employee's contributions of both EPF and VPF. It doesn't include any of Employer's contributions.

The statement received from the EPFO will have the taxable portion of the interest and it'll need to be declared in your tax returns.

Example:

Let us assume that you are going to contribute Rs. 3 lakhs into your EPF in the FY 2021-22. The interest earned up to Rs. 2.5 lakhs will be tax free. The interest earned on the remaining amount of Rs. 50,000 will be taxed as per your income tax slab rates.

 

2) PF Amount Withdrawn under the following Circumstances will be Completely Tax Free:

Complete (100%) withdrawal of PF amount at retirement.

Employee leaves the job after 5 years of service. To compute 5 years of service, the service provided with the previous employer should also be considered.

Employee leaves the job before 5 years of service due to ill health or dis-continuation of employer's business or reasons beyond the control of the employee.

Employee changes jobs and the PF balance amount with previous employer is transferred to the new employer's PF account.

 

3) PF Withdrawal Amount will be Taxed in the Following Manner if You Withdraw before 5 Years of Service:

Employee's contribution will be taxed as "Income from Salary".

The interest earned on employee's total contribution will be taxed as "Income from other sources".

Employer's contribution and interest will be taxed to employee as "Income from Salary".

 

4) Monthly Pension:

The monthly pension from EPS after retirement is taxable. It will be considered under "Income from Salary" and it will be taxed as per your income tax slabs.

 

What is Salary in EPF?

Employee's salary may have many components. But, for the purpose of EPF, salary means Basic Pay + DA (Dearness Allowance).


Salary = Basic Pay + DA.

 

EPFO

EPFO stands for Employees Provident Fund Organisation.

EPFO is a body of the Indian Government. EPFO governs the operations of the EPF scheme.

 

Components of EPF

EPF account contains the following components.

  1. EPF (Employee Provident Fund)

  2. EPS (Employee Pension Scheme)

  3. EDLIS (Employees Deposit Linked Insurance Scheme)


When the employer opens EPF account, the employee is automatically enrolled for EPF, EPS and EDLIS. There is no separate process for joining EPS or EDLIS.

 

EPF Contribution Limits

Contribution Limit for Employee:

Employee will contribute 12% of Basic Pay + DA every month and it will go towards EPF account.

For the purpose of calculation, a maximum of Rs. 15,000/- will be considered for monthly Basic Pay + DA even if the employee is earning more than that.

That is, Rs. 1,800/- (12% of Rs. 15,000/-) is the maximum monthly contribution limit for employees.

This is the calculation method followed by most of the Employers and EPFO Offices.

But, there are Employers who don't have such limits on contributions. Please check with your Employer to know your contribution limits.

 

Contribution Limit for Employer:

Employer will make equal 12% contribution towards employee's EPF account.

But, only 8.33% will go towards EPS (Employee Pension Scheme) account.

The remaining 3.67% will go towards EPF account.

For the purpose of calculation, a maximum of Rs. 15,000/- will be considered for monthly Basic Pay + DA even if the employee is earning more than that.

That is, Rs. 1,250/- (8.33% of Rs. 15,000/-) is the maximum monthly contribution amount towards EPS account.

The remaining amount (Employee's contribution minus EPS contribution) will be the employer's share towards EPF account.

 

EPF Account

It is the account to which the employee contributes 12% of Basic Pay + DA every month.

It is the account to which the employer contributes 3.67% of Basic Pay + DA every month.

Both employee and employer contributions will earn interest as per the interest rate announced by the Government from time to time.

This scheme earns yearly compounded interest.

It means interest on contributions will be calculated every month in a financial year (from April to March) and it gets credited to the account in April of next financial year.

Employee can withdraw the entire (100%) accumulated amount at retirement.

 

EPS Account

The purpose of this account is to provide monthly pension to the employee after retirement.

It is the account to which the employer contributes 8.33% of Basic Pay + DA every month.

However, it is restricted to a maximum of Rs. 1,250/- per month (that is 8.33% of Rs. 15,000/-). This change is effective from 01-Sep-2014.

Employee does not contribute any amount towards this scheme.

The Government of India contributes 1.17% of monthly Basic Pay + DA every month.

The amount in EPS does NOT earn any interest.

You can't withdraw any portion of EPS when you retire. The purpose is purely to provide monthly pension.

 

EDLIS Account

EDLIS:

EDLIS provides life insurance cover to employees.

This scheme provides Life insurance cover to a maximum of Rs. 7 Lakhs. The minimum insurance under the scheme is Rs. 2.5 lakhs.

The cost of the insurance is paid by the Employer.

Employer will pay 0.5% of monthly Basic Pay + DA every month (to a maximum of 0.5% of Rs. 15,000) towards the premium of the life insurance.

Employee is covered under this scheme from the first day of employment.

The life insurance coverage of an employee is purely based on his monthly Basic Pay + DA.

The Life Insurance cover is irrespective of whether employee dies during working hours or non-working hours.

The life insurance cover is irrespective of the cause of death of the employee.

There is no exclusions under this scheme.

 

How much is the coverage?

Your insurance coverage is 35 times of average of last 12 months' Basic Pay plus DA. In addition, there will be Rs. 1.75 lakhs as a bonus.

Your coverage = [(average of last 12 months' Basic + DA) x 35] + 1,75,000

For this calculation, a maximum of Rs. 15,000 will be considered as your last 12 month's average Basic Pay + DA.

The bonus amount is based on 50% of the average balance in the account during the 12 months before the death of employee. The maximum allowed bonus amount is Rs. 1.75 lakhs

The nominee or legal heirs can claim this insurance amount following the death of the employee.

Employers have the choice of opting out of EDLIS and go for "Group Insurance" scheme. But, it should be approved by EPFO and the life coverage from Group Insurance scheme should be equal to or more than the coverage provided by EDLIS.

 

EPF Account Admin Charges

PF account admin charges are paid by the employer.

Employer will pay 0.85% of Basic Pay + DA every month towards PF account admin charges.

Employer will pay 0.01% of Basic Pay + DA every month towards EDLIS admin charges.

 

EPF Interest Rate (%)

The current annual interest rate of the PF scheme is 8.50% for the financial year 2020-21. That is, for the period from 01-Apr-2020 to 31-Mar-2021.

Interest rate of PF account is not fixed and it is determined by the Government of India from time to time.

 

EPF Interest

Both employee and employer contribution towards EPF account will earn interest as per the interest rate from time to time.

But, employer contribution towards EPS account will NOT earn any interest.

 

EPF Compounding Frequency

PF account follows yearly compounding frequency.

It means that interest on contributions will be calculated every month in a financial year (from April to March) and they gets credited to the account in April of the following financial year.

 

VPF

VPF stands for Voluntary Provident Fund.

VPF is an additional contribution facility for employees.

In VPF, employees can contribute more than the compulsory 12% of Basic Pay + DA every month.

But, employer will not match additional contribution by employee.

Employer will stick with the compulsory contribution of 12% Basic Pay + DA every month.

Income Tax benefits on VPF will be same as that of the EPF only. No additional benefits for VPF.

 

Retirement Age

We need to know the retirement age for 2 things.

  1. Retirement age for EPF

  2. Retirement age for EPS

1) Retirement age for EPF:

The minimum retirement age for EPF is 55 years. There is no fixed retirement age for EPF in Private Sector Organisations. It can be 55 years, 58 years, 60 years or even more.

When the employee reaches the designated retirement age, he can withdraw the entire (100%) accumulated amount in EPF account. This will be the total of employee contribution, employer contribution and interest earned on both.

Upon complete withdrawal, the EPF account will be closed and you are no longer a member of EPF.

 

2) Retirement age for EPS:

The retirement age is 58 years for EPS benefits.

It means, when the employee reaches 58 years of age, the employer contribution to EPS stops.

Employee will be starting to get monthly pension immediately.

In case, employee's EPF retirement age is more than 58 years, then the entire 12% contribution from employer will go towards EPF account.

 

In-active EPF Accounts

If an EPF account does not receive contributions for a consecutive period of 3 years (36 months), then it is considered as "In-active" account.

The in-active situation generally arises when an employee forgets to withdraw or transfer the PF amount due to job transfer reasons.

Such in-active EPF accounts can be withdrawn or transferred to existing EPF accounts.

From 01-Apr-2016 onwards, any in-active EPF account will earn interest as per the interest rate announced by the Government of India from time to time. Note that EPFO stopped paying interest to in-active accounts from April, 2011.

Recently, EPFO launched "Inoperative A/c Helpdesk" facility on its website http://www.epfindia.com

You can check for your in-active accounts using this facility and make a provision to withdraw or transfer the funds to existing PF account.

 

UAN

UAN (Universal Account Number):

Till October, 2014, every employee was given a PF Account number by their employer.

If you change your job, then you used to get a new PF Account number.

Maintaining multiple account numbers was a problem for many employees.

Quite a few employees forget to withdraw or transfer PF amount due to frequent job changes.

To address these issues, EPFO came up with UAN (Universal Account Number) concept.

With UAN, you will have only one PF account number even if you change your job multiple times.

When you change your job, just provide your UAN to your new employer. All your PF accounts will come under one umbrella.

 

UAN Benefits:

In addition to this, UAN number provides the following benefits

  1. You can view and update your profile

  2. You can download and print your UAN Card

  3. You can download your latest EPF Passbook

  4. You can check various PF Member Numbers allocated by your previous employers under UAN

  5. You can lodge and view transfer claims

  6. You can update KYC (Know Your Customer) details

 

UAN Website:

To get the above mentioned benefits, you need to register for UAN at website http://uanmembers.epfoservices.in

 

How to Check EPF Balance?

You can check your EPF balance in the following ways.

  1. Annual Statement

  2. EPF Mobile App

  3. EPF Balance by SMS

  4. EPF Passbook

  5. UAN Number

Please find below the details of each method.

 

1) Annual Statement:

EPFO office sends "Annual Statement" every financial year to the employee through his employer.

This statement is sent upon completion of the financial year.

The statement shows the following details

  • opening balance at the beginning of the financial year

  • employee contribution

  • employer contribution

  • interest rate for the financial year

  • interest earned

  • withdrawals made

  • closing balance at the end of financial year

 

2) EPF Android App (m-epf):

EPFO launched a mobile App in September, 2015. The App name is "m-epf". It is an Android App and you can download from Google Play store. The link is

m-epf Android App

Using this App, you can

  • activate UAN

  • check your PF balance

  • check your pension status

  • and much more

 

3) EPF Balance by SMS:

You can check your EPF balance through SMS and this facility was introduced from July-2011 onwards.

Go to http://epfindia.com/site_en/KYEPFB.php and enter your PF number and mobile number.

You will get SMS with your current EPF balance (including employee amount and employer amount).

 

4) EPF Passbook:

EPFO introduced "Online Passbook" facility back in November, 2012.

You can register online at http://members.epfoservices.in to view your EPF account passbook.

There is no need to create any user Id or password.

You have to register using your mobile number and one of the identification proof like PAN, AADHAR, NPR (National Population Register), Bank Account, Voter ID, Passport or Driving License.

Upon successful registration, you can login and view your EPF account details at any time.

 

5) UAN Number:

If you have activated your UAN number, you can view your EPF Passbook online.

 

EPF Partial Withdrawal Rules

Employee can partially withdraw from PF account for the following reasons.

  1. Purchase of House, Flat or Construction of house

  2. Purchase of Site

  3. Additions, Alteration, Improvements in house - First Time

  4. Additions, Alteration, Improvements, Repairs in house - Second Time

  5. Repay loan taken for purchase of site or house or construction of house

  6. Medical treatment or disease

  7. Marriage

  8. Education of Children

  9. Natural Disasters

  10. Cut in Electricity Supply

  11. Physically handicapped employees

  12. Some special cases

  13. Just an year before retirement

  14. Withdraw at the age of 55 years

  15. Unemployed for more than a month

The details about each of the withdrawal are given below.

 

1) Purchase of House, Flat or Construction of house:

Employee can opt for this withdrawal for the purpose of purchasing a house or flat or for the construction of house including the purchase of site.

This withdrawal is allowed only for the purpose of employee and his family living in the house. It is not allowed for renting purposes.

Employee should complete at least 5 years of membership with EPF fund to get this withdrawal.

Employee's eligible withdrawal amount will be 36 times monthly Basic pay + DA or total of employee and employer contributions with interest or total cost of purchase or construction of house, whichever is lower.

Employee can withdraw only once during his entire service for this purpose.

The house or flat should be free from encumbrance.

The house or flat should be in the name of the employee or employee's spouse or jointly by employee and his/her spouse.

Employee can't opt for this withdrawal if he/she wants to purchase the house or flat jointly with someone other than spouse.

If the actual amount spent is lesser than the amount withdrawn, then employee can deposit the excess amount back into the EPF account within 30 days from the purchase of house or flat.

If the amount withdrawn is not utilised due to various issues, then employee must deposit the entire withdrawn amount back into his/her EPF account without fail.

 

2) Purchase of Site

Employee can opt for this withdrawal for the purpose of purchasing a site.

Employee should complete at least 5 years of membership with EPF fund to get this withdrawal.

Employee's eligible withdrawal amount will be 24 times monthly Basic pay + DA or total of employee and employer contributions with interest or total cost of purchase of site, whichever is lower.

Employee can withdraw only once during his entire service for this purpose.

The site should be free from encumbrance.

The site should be in the name of the employee or employee's spouse or jointly by employee and his/her spouse.

Employee can't opt for this withdrawal if he/she wants to purchase a site jointly with someone other than spouse.

If the actual amount spent is lesser than the amount withdrawn, then employee can deposit the excess amount back into the EPF account within 30 days from the purchase of site.

If the amount withdrawn is not utilised due to various issues, then employee must deposit the entire withdrawn amount back into his/her EPF account without fail.

 

3) Additions, Alteration, Improvements in house - First Time:

Employee can opt for this withdrawal for additions, major alterations or improvements necessary to the house.

This withdrawal is allowed only after 5 years from the date of purchase or construction of house.

Employee's eligible withdrawal amount will be 12 times monthly Basic Pay + DA or employee's own contribution with interest or the actual cost towards alterations, whichever is lower.

Employee can withdraw only once during his entire service for this purpose.

If the actual amount spent is less than the amount withdrawn, then employee can deposit the excess amount back into the EPF account within 30 days from the alterations done at house.

If the amount withdrawn is not utilised due to various issues, then employee must deposit the entire withdrawn amount back into his/her EPF account without fail.

 

4) Additions, Alteration, Improvements, Repairs in house - Second Time:

Employee can opt for this withdrawal for additions, alterations, improvements or repairs of the house.

This withdrawal is allowed only after 10 years from the date of first withdrawal as stated in Point #3 (this withdrawal is allowed after 10 years from the date of first withdrawal for the purpose of additions, alterations, improvements or repairs in house).

Employee's eligible withdrawal amount will be 12 times monthly Basic pay + DA or employee's own contribution with interest or the actual cost towards alterations, whichever is lower.

Employee can withdraw only once during his entire service for this purpose.

If the actual amount spent is lesser than the amount withdrawn, then employee can deposit the excess amount back into the EPF account within 30 days from the alterations done at house.

If the amount withdrawn is not utilised due to various issues, then employee must deposit the entire withdrawn amount back into his/her EPF account without fail.

 

5) Repay loan amount taken for purchase of site or house or construction of house:

Employee can opt for this withdrawal to repay the loan amount taken for the purchase of site or house or flat or construction of house.

Employee should complete at least 10 years of membership with EPF fund to get this withdrawal amount.

Employee's eligible withdrawal amount will be 36 times monthly Basic pay + DA or total of employee and employer contribution with interest or the remaining loan amount, whichever is lower.

Employee can withdraw only once during his entire service for this purpose.

Employee should submit the proof of documents of loan granted and remaining loan balance statements.

 

6) Medical treatment or disease:

Employee can opt for advance from EPF account for the medical treatment of himself or family members including spouse, children, dependent parents, dependent parent-in-laws in case of female employees.

Employee can opt for advance from EPF account for one of the following reasons.

  • Hospitalisation for a month or more

  • Major surgery operation

  • Major diseases like T.B. (Tuberculosis), leprosy, paralysis, cancer, mental and heart diseases

  • Granted leave by employer for the treatment of the disease

There is no eligibility period to get this advance.

Employee's eligible advance amount will be 6 times monthly Basic Pay + DA or employee's total contribution with interest, whichever is lower.

Employee can withdraw any number of times during his service for treatment.

To get the advance, employee should produce the following documents.

  • Letter from Employer stating that ESI (Employees State Insurance Scheme) benefits are not available to the employee

  • Certificate from Doctor stating that major surgery or hospitalisation for a month or more is necessary

  • Leave grant letter from Employer for the treatment of the disease

 

7) Marriage:

Employee can get advance from EPF fund for the marriage of himself, son, daughter, brother or sister.

Employee should complete at least 7 years of membership with EPF to get this advance amount.

Employee's eligible advance amount will be 50% of employee's total contribution with interest.

Employee can withdraw 3 times during his entire service for this purpose.

Employee should submit Marriage Invitation as a proof to get the advance amount.

 

8) Education of Children:

Employee can get advance for the post-matriculation education of son or daughter. Post-matriculation education means the studies taken after completion of 10th standard or SSLC.

Employee should complete at least 7 years of membership with EPF to get this advance amount.

Employee's eligible withdrawal amount will be 50% of employee's total contribution with interest.

Employee can get this advance 3 times during his entire service for this purpose.

Employee should submit a copy of fees to be paid to the educational institution as a proof to get the amount.

 

9) Natural Disasters:

Employee can get advance amount if his property is damaged due to natural disasters like floods, earthquake, etc.

Employee's eligible advance amount will be Rs. 5,000 or 50% of employee's total contribution with interest, whichever is lower.

There is no eligibility period to get this advance.

To get this advance, employee should meet the following conditions.

  • State Government should declare that the natural disaster affected the common public in the area

  • Employee should get a certificate from the concerned authority that the natural disaster has damaged his property

  • Employee should apply for this advance within 4 months of disaster declaration by the State Government

 

10) Cut in Electricity Supply:

If there is an electricity cut in the company and if employee's salary is reduced because of that, then employee can get this advance.

Employee's eligible advance will be Rs. 300/- or 1 month's Basic Pay + DA or employee's total contribution with interest, whichever is lower.

Employee can get only 1 advance during his entire service for this purpose.

To get this advance, employee should meet the following conditions:

  • Employee's basic pay + DA for any 1 month (starting from January, 1973) was 75% or less than 75% of basic pay + DA for a month

  • State Government should declare that there was a cut in the electricity supply in the area in which the company is located

  • Employer should certify that employee's monthly pay was reduced due to electricity cut

 

11) Physically handicapped employees:

Physically handicapped employees can get this advance to purchase an equipment that will reduce the difficulties of handicap.

There is no eligibility period to avail this withdrawal.

Employee's eligible withdrawal amount will be 6 times monthly Basic pay + DA or employee's total contribution with interest or actual cost of equipment, whichever is lower.

Employee can get this advance 2 times in his entire service. The second advance will be allowed only after 3 years from the date of payment of first advance.

To get this advance, employee should produce a medical certificate from Doctor stating that employee is physically handicapped.

 

12) Some special cases:

Employee can withdraw from his EPF account in some special cases. They are given below.

Employee is out of job:

Employee can withdraw from EPF account if he is out of job for the following reasons (other than a strike).

  • if the company is closed for more than 15 days

  • if the employee loses job without a compensation from employer

  • if employee does not receive salary for a continuous period of 2 months or more

Employee's eligible withdrawal amount will be employee's total contribution with interest.



Employee dismissed by Employer:

If employee is dismissed by the employer and such dismissal is challenged by the employee and the case is pending in Court.

In this case, employee is eligible to withdraw 50% of his own contributions with interest.

 

Company is closed for more than 6 months:

If the organisation is closed for more than 6 months and there is no sign of compensation to the employee at an early date.

In this case, employee can withdraw 100% of employer's total contribution with interest.

This will be paid as a "recoverable" advance and employee has to repay it after the re-opening of the company. This will be deducted from employee's salary in a maximum of 36 installments.

In worst case, if the company remains closed for more than 5 years, then the "recoverable" advance will be converted into "non-recoverable" advance.

 

13) Just an year before retirement:

Employee is allowed to withdraw up to 90% of the balance (employee contribution, employer contribution and interest earned on both) in PF account after 54 years of age or within 1 year before retirement, whichever is later.

This withdrawal does not require any eligibility criteria.

Employee can withdraw for this purpose only once during his entire service.

Employee should produce a certificate from Employer stating the date of retirement.

 

14) Withdraw at the age of 55 years:

When the employee reaches 55 years of age, he is allowed to withdraw up to 90% of the balance (employee contribution, employer contribution and interest earned on both) in PF account for the purpose of investing in "LIC Varishtha Pension Bima Scheme" to get monthly pension.

 

15) Unemployed for more than a month:

If you are unemployed for more than a month, then you can withdraw up to 75% of the accumulated wealth.

The amount withdrawn is non-refundable. It means that once you withdraw the amount, then you can't pay it back to EPFO. So, you need to think before you withdraw.

Even after this withdrawal, you are still a member of EPF and you are eligible for Pension benefits.

 

EPF Full Withdrawal Options

There are many situations in which an employee can withdraw his entire (100%) balance in PF account. They are given below.

  1. retirement from service after reaching the age of 55 years

  2. employee is unable to work due to permanent disability. Employee should produce Medical Certificate from Doctor stating that employee is totally disabled and unable to work

  3. employee is migrating to a foreign country for permanent settlement or employment reasons

  4. employee's job is terminated by employer due to layoff or redundancy reasons

  5. employee opts for VRS (Voluntary Retirement Scheme)

  6. company is closed but the employee is transferred by the employer to another company which is not covered under EPF Act, then employee can withdraw entire (100%) PF balance after a period of 2 months

  7. employee is transferred to another company (with the same employer) and if it is not covered under EPF Act, then employee can withdraw entire (100%) PF balance after a period of 2 months

  8. employee's service is terminated and he does not get another job for a continuous period of 2 months. Note that the 2 months waiting period will not be applicable for female employees resigning the job for the purpose of getting married

If an employee withdraws full (100%) PF amount after resigning from job, his EPF membership will be terminated. It means he is not a member of EPF scheme after the full withdrawal.

 

Employee Death Benefits

In case of death of the employee, the nominees can claim the following benefits.

1) Death before retirement:

Entire accumulated amount in PF account. This will include total employee contributions, total employer contributions and interest earned on both. This will be a lump sum amount.

Insurance coverage amount provided by EDLIS account. This will be a lump sum amount.

Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

2) Death after retirement:

Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

 

Withdrawal Process

Earlier, withdrawal from EPF was a lengthy process for employees. Now, it is made simple with the help of UAN.

If the employee had activated UAN, then employee can submit the withdrawal request directly to EPFO office.

This helps Employees to withdraw from EPF without the employer's signature or involvement.

 

Job Change

Many employees withdraw PF amount when they change their jobs. But, note that it is an illegal activity.

Employee can withdraw PF only if he is not in a employment for 2 months or the employee is moving overseas for settlement.

So, it is advisable to transfer PF amount to your new employer following a job change.

 

Is EPF Compulsory? Can I opt out?

EPF is compulsory for an employee if his monthly Basic pay + DA salary is less than Rs. 15,000/-.

Note that earlier the limit was Rs. 6.500/-. This change was effective from 01-Sep-2014 onwards.

An employee can opt out of EPF if his monthly Basic pay + DA is more than Rs. 15,000/- at the time of joining the organisation.

If an employee wants to opt out of EPF, then he has to do at his very first employment.

Once an employee becomes a member of EPF and he contributes to EPF even for a single month, then he has to continue with EPF. He can't opt out.

In case if an employee opts out of EPF, then there will not be any EPF deduction from salary. It means you will get all salary components in hand.

 

EPS - Employees Pension Scheme

Under EPS scheme, employee will receive monthly pension after retirement.

Employee is eligible for pension only when he reaches 58 years of age and has completed 10 years of service.

Employee is eligible for pension whose age is between 50 years and 58 years and has completed 10 years of service. However, it is at a discounted rate of 4%.

There is no pension for an employee before the age of 50 years.

Under this scheme, the employee will receive monthly pension throughout his life. After his death, the monthly pension will go to spouse followed by 2 children up to their age of 25.

 

When does Employee get Pension?

An employee gets pension under EPS in the following situations.

1) Superannuation Pension:

Employees who have completed 10 years of service and retires at the age of 58 years.

Employee can continue in service while receiving this pension.

 

2) Retiring Pension:

Employees who have completed 10 years of service and retires between the age 50 years and 58 years.

Employee should not be in service to receive the pension.

Employees retiring before 58 years, 4% of the monthly pension will be deducted for every year falling short of 58 years.

For example, if an employee of 56 years of age opts for reduced pension and his calculated pension amount is Rs. 1000/-, then his reduced pension will be Rs. 921.60. It is calculated as follows.

Year 1:
1000 x (0.04) = 40
Reduced Pension = 1000 - 40 = 960

Year 2:
960 x 0.04 = 38.4
Reduced Pension = 960 - 38.4 = 921.60

 

3) Permanent and Total disability:

Employees who are unable to work due to permanent and total disability during the service.

 

4) Death of employee:

Employee's family is eligible for pension when the employee dies.

 

Pensionable Service

The pensionable service is determined by the number of years employer contributed to employee's EPF.

If your employer did not deposit the contribution amount for certain months, then such months are not considered for calculation of service.

If an employee reaches 58 years of age and has completed 20 years of service or more, his pensionable service will be increased by 2 years for calculation purposes.

For calculation purposes, if your service is more than or equal to 6 months, then it will be rounded off to one year. If service is less than 6 months, then such fraction of service period is not considered.

For example, if you worked for 25 years and 8 months, your service will be considered as 26 years. But, if your service is 25 years and 3 months, then service will be considered as 25 years only.

A maximum of 35 years will be considered for calculation purposes even if you have served for more than 35 years.

 

Pensionable Salary

Pensionable salary is the average of last 12 months' Basic Pay + DA immediately before retirement.

A maximum of Rs. 15,000/- will be considered as a pensionable salary for calculation purposes even if it is more than Rs. 15,000/-.

 

How to Calculate Monthly Pension?

There are 2 methods to calculate monthly pension. That is based on whether employee joined EPF before or after 15-Nov-1995.

1) Employees joined before 15-Nov-1995:

This is calculated based on "Past Service Pension" and "Pensionable Salary Pension" components. Also, this pension is a part of "Family Pension Scheme (FPS)".

2) Employees joined after 15-Nov-1995:

Monthly pension is calculated by using the following formula.

Monthly pension = (pensionable salary x pensionable service) / 70

Pensionable salary is the average of last 12 months' Basic pay + DA immediately before retirement. A maximum of Rs. 15,000/- will be considered for calculation purposes.

Pensionable service is the number of years of service. A maximum of 35 years will be considered.

 

Minimum & Maximum Monthly Pension

Minimum pension available under EPS scheme is Rs. 1,000.

From the financial year 2014-15, the government has fixed the minimum monthly pension benefit as Rs. 1,000/-.

Maximum pension an employee can get under this scheme is calculated as shown below.

= (15000 x 35) / 70

= Rs. 7,500

Maximum pension amount is Rs. 7,500.

 

EPS Withdrawal Rules

You can withdraw the amount in EPS. But, your total service should be less than 9 years and 6 months.

Once you complete 9 years and 6 months of service, then you can't withdraw EPS amount.

Even if you are eligible, you still can't withdraw the entire balance in EPS. You can withdraw only a certain portion of it.

The withdrawal amount depends on the number of years of service and your monthly basic pay + DA components.

The below table provides the proportion for withdrawal.

Years CompletedWithdrawal Proportion
1 year1.02 times
2 years1.99 times
3 years2.98 times
4 years3.99 times
5 years5.02 times
6 years6.07 times
7 years7.13 times
8 years8.22 times
9 years9.33 times

For example, you completed 7 years of service and your monthly basic pay + DA is Rs. 15,000.

You can calculate your eligible withdrawal amount by (15000 x 7.13 = Rs. 1,06,950).

 

Nomination

Nomination facility is available in EPF.

Nomination is required to settle the benefits in case of death of the employee.

Employee can nominate either at the time of joining EPF or thereafter.

Employee can nominate his/her spouse, children, dependent parents and expired son's widow and children. Employee can't nominate brother or sister.

An employee who doesn't have a family can nominate any person. However, this will become invalid once the employee gets married and acquires his/her family.

When employee nominate multiple people, the percentage of sharing of benefits should be mentioned. The total percentage should not exceed 100%.