The Employees’ Provident Fund or EPF is a popular savings scheme that has been introduced by the EPFO under the supervision of the Government of India.
The employee and employer each contribute 12% of the employee’s basic salary and dearness allowance towards EPF. The current rate of interest on EPF deposits is 8.15% p.a.
The accrued interest on the EPF is tax-free and can be withdrawn without paying for the same. Employees avail of a lump-sum amount on their retirement, which is inclusive of the accrued interest.
Individuals can apply to avail of various online services of EPF India by accessing the official portal. The EPF online portal is a user-friendly platform that ensures the flow of services is transparent, efficient, and hassle-free.
EPF (Employees’ Provident Fund) is a retirement benefits scheme provided by the Employees’ Provident Fund Organization (EPFO). The employee and the employer contribute to the EPF India scheme on a monthly basis in equal proportions of 12% of the basic salary and dearness allowance. EPF is a tax-saving instrument that offers relatively higher interest rates on investments. A part of the employer’s contribution (8.33% out of 12%) is directed towards the Employees’ Pension Scheme (EPS).
EPFO - Employee Provident Fund Organization
EPFO or Employees’ Provident Fund Organisation is a non-constitutional body that promotes employees to save funds for retirement.
EPFO was launched in 1951 and is governed by the Ministry of Labour and Employment. It offers schemes that cover Indian and international workers.
Schemes Offered Under EPFO
Given below are the three schemes that are offered under EPFO:
- Employees’ Provident Funds Scheme 1952 (EPF)
- Employees’ Pension Scheme 1995 (EPS)
- Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)
EPF interest rate for FY 2023-24
The interest rate on EPF is reviewed annually. EPF interest rate for FY 2023-24 is 8.25%. Once EPFO notifies the interest rate for a financial year and the year ends, the interest rate is calculated for the month-wise closing balance and then for the entire year.
The year in which the new interest rates are announced stays valid for the next financial year i.e. from the year starting on 1st April of one year to the year ending on 31st March of the next year. Here are a few important facts to know about EPF Interest Rate 2023-24:
- The rate of interest i.e. 8.25% is valid and will be applicable only on EPF deposits made between the months of April 2023 and March 2024.
- The interest, even though calculated on a monthly basis, is transferred to the Employees’ Provident Fund account only on a yearly basis on 31st March of the applicable financial year.
- The transferred interest is summed up with the next month i.e. April’s balance and is then again used for the calculation of the interest.
- If the contribution is not made into an EPF account for thirty-six months continuously, the account becomes dormant or inoperative.
- Interest is offered on inoperative accounts of employees who have not attained retirement age.
- Interest is not provided on the amount deposited in inoperative accounts of retired employees.
- The interest earned on inoperative accounts is taxable as per the member’s slab rate.
- For contributions made towards the Employees’ Pension Scheme by the employer, the employee shall not receive any interest. However, a pension is paid out of this amount after the age of 58.
Objectives of EPFO
- To ensure that each employee only has one EPF account.
- Compliance must be made as simple as possible.
- Ensure that organizations follow all of the EPFO’s rules and regulations regularly.
- To assure the dependability of internet services and to increase their facilities.
- All member accounts should be easily accessible online.
- Claim settlement times will be lowered from 20 to 3 days.
- Encouragement and promotion of voluntary compliance.
UAN and EPFO Portal
All EPF subscribers have online access to their PF accounts and can execute operations such as withdrawal and checking their EPF balance.
EPFO assigns each member a 12-digit number known as the UAN. Even if an employee changes employers, his or her UAN remains the same.
The Universal Account Number (UAN) simplifies access to the EPFO member portal. When a member’s job changes, his or her member ID changes, and the new ID is linked to the UAN. Employees must, however, activate their UAN to use the services online.
EPF Eligibility
- The Employee Provident Fund is open for employees of both the Public and Private Sectors, which means all employees can apply to become a member of EPF India.
- Any organization that employs at least 20 individuals is deemed liable to extend the benefits of EPF to its employees.
- After becoming an active member of the EPF scheme, the employees are eligible to avail of several Employees Provident Fund benefits, including insurance benefits and pension benefits.
EPF Contribution
The employer and the employee make equal contributions to the EPF account as shown below:
| Contribution by | Monthly Percentage Contributed |
| Employer | 12% |
| Employee | 12% or 10% |
| Total | 24% |
Key Points about EPF Contribution:
- 12% Employer’s contribution includes 3.67% EPF and 8.33% EPS (also known as EPF pension)
- 10% EPF share is valid for the organizations where there are 20 or less than 20 employees /organizations with losses incurred more than or equal to the net worth (at the end of the financial year) /organizations declared sick by the Board for Industrial and Financial Reconstruction
- The total contribution made by the employer is distributed as 8.33% towards the Employees’ Pension Scheme and 3.67% towards the Employees’ Provident Fund.
- All contributions are updated in the EPF member passbook
- The contribution made by the employee goes totally towards the provident fund of the employee.
- Apart from the above-made contributions, an additional 0.5% towards EDLI has to be paid by the employer.
- Certain administration costs towards EDLI and EPF standing at the rate of 1.1% and 0.01% respectively also have to be incurred by the employer. This means that the employer has to contribute a total of 13.61% of the salary towards this scheme.
Employee’s Contribution towards EPF
The contribution rate for the employee is fixed at 12%. However, the rate is fixed at 10% for the below-mentioned organizations:
- Organizations or firms employing a maximum of 19 workers
- Industries declared as sick industries by the BIFR
- Organizations suffering an annual loss much more as compared to their net value
- Coir, guar gum, beedi, brick and jute industries
- Organizations operating under the wage limit of Rs. 6,500
Employer’s Contribution towards EPF
The minimum amount of contribution to be made by the employer is set at a rate of 12% of Rs. 15,000 (although they can voluntarily contribute more). This amount equals Rs. 1,800 per month. It means that both the employer, as well as the employee, have to contribute Rs. 1,800 each per month towards this scheme. Initially, this amount was set at 12% of Rs. 6,500, which would equal Rs. 780 to be contributed by both the employer and the employee.
- The contribution from both parties is deposited into the EPFO (Employees’ Provident Fund Organisation)
- This is a long-term investment fund for the contributors which helps them continue an independent life after retirement
EPF Form
EPF forms are vital for the processing of any activity in an EPF employee member’s EPF account. Be it registration, PF transfer, withdrawal or availing loans, an EPF form is mandatory for completing such activities.
The table below offers a brief idea about the different EPS forms and the purpose they are required for –
Form | Purpose Of The Form | Application |
Form 2 | For nominating and declaring | Applicable to both EPF and EPS. |
Form 5 | For registering | Applicable to new employees registering for EPS and EPF. |
Form 5 IF | For availing a claim under EDLI scheme | |
Form 10C | For availing withdrawal benefits or scheme certification. | EPS |
Form 10D | For availing monthly pension. | |
Form 11 | For transferring EPF account. | EPF |
Form 14 | For purchasing LIC policy. | |
Form 15G | For availing tax-saving benefits on interest. | EPF |
Form 19 | For settling employees provident fund. | EPF |
Form 20 | For settling employees provide a fund in case of death. | EPF |
Form 31 | For EPF withdrawal. | EPF |
EPF Benefits
Capital Appreciation- The PF online scheme offers a pre-fixed interest on the deposit held with EPF India.Additionally, rewards extended at maturity further ensure growth in the employees’ funds and accelerate capital appreciation.
Corpus for Retirement- Around 8.5% of an employer’s contribution is directed towards the Employee Pension Scheme. In the long run, the sum deposited towards the employee provident fund helps to build a healthy retirement corpus.Such a corpus would extend a sense of financial security and independence to them after retirement.
Emergency Corpus- Uncertainties are a part of life. Therefore, being financially prepared to face such unwarranted situations is the best an individual can do to deal with exigencies.An EPF fund acts as an emergency corpus when an individual requires emergency funds.
Tax-saving- Under Section 80C of the Indian Income Tax Act, an employee’s contribution towards their PF account is deemed eligible for tax exemption.Moreover, earnings generated through EPFO schemes are exempted from taxes. Such exemption can be availed up to a limit of Rs. 1.5 Lakh.
Easy Premature Withdrawal-Members of EPF India are entitled to avail benefits of partial withdrawal.Individuals can withdraw funds from their PF account to meet their specific requirements like pursuing higher education, constructing a house, bearing wedding expenses, or for availing medical treatment.
FAQs
How does the PF amount from defaulting members get recovered?
Prosecution under Section 14, realization of debtors’ dues, attachments of bank accounts, attachment and sale of properties, and detention and arrest of the employer are some of the methods used to recover the PF amount from employers.
Who should an employee contact if he or she is denied PF membership?
The employee must first approach the employer. If the employer does not supply it, he or she may seek the Regional Provident Fund Commissioner of the PF office.
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