Employees Provident Fund (EPF) is a scheme in which retirement benefits are accumulated. Under the scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer.

POINTS TO BE CONSIDERED FOR EPF

1. Establishment to be covered: All establishment has been covered in this scheme.
2. Number of employee: Organisation which have 20 or more employee has been mandatory covered under this scheme, subject to certain conditions and exemptions even if they employ less than 20 persons each.
3. Salary requirement: Employee whose ‘pay’ is more than Rs 15,000 a month at the time of joining, is not eligible and is called non-eligible employee. Employees drawing less than Rs 15,000 per month have to mandatorily become members of the EPF. However, an employee who is drawing ‘pay’ above prescribed limit (currently Rs 15,000) can become a member with permission of Assistant PF Commissioner, if he and his employer agree.
4. Contribution by employer and employee: Contribution paid by the employer is 12 per cent of basic wages plus dearness allowance plus retaining allowance. An equal contribution is payable by the employee also. In case of establishments which employ less than 20 employees or meet certain other conditions as notified by the EPFO, the contribution rate for both employee and the employer is limited to 10 percent.
5. Higher voluntary contribution by employee or Voluntary Provident Fund: The employee can voluntarily pay higher contribution above the statutory rate of 12 percent of basic pay. This is called contribution towards Voluntary Provident Fund (VPF) which is accounted for separately. This VPF also earns tax-free interest. However, the employer does not have to match such voluntary contribution.
6. Withdrawals from the EPF account: According to the EPF Act, for claiming final EPF settlement, one has to retire from service after attaining 55 years of age. The total EPF balance includes the employee’s contribution and that of the employer, along with the accrued interest.

There is, however, a window to partially withdraw the amount for those nearing retirement. Anyone over 54 can withdraw up to 90 percent of the accumulated balance with interest. But what if some .

With effect from December 6, 2018, the employees can withdraw 75% of their EPF corpus after remaining unemployed for one month and balance 25% he is out of employment for 60 straight days or more. Prior to this, an employee can make such withdrawal only after remaining unemployed for more than 60 days.

To withdraw money, one may now use ‘UAN based Form 19’ and in effect bypass the employer signature requirement.

7. Interest on account: The Interest in EPF is calculated on the basis of monthly running balance.

8. Universal Account Number (UAN): UAN is allotted by EPFO. The idea is to link multiple Member Identification Numbers (Member Id/PF Account number) allotted to a single member under single Universal Account Number. UAN will help the member to view details of all the Member Identification Numbers (Member Id) linked to it. If a member is already allotted UAN then he/she is required to provide the same on joining new establishment to enable the employer to in-turn mark the new allotted Member Identification Number (Member Id/PF account number) to the already allotted Universal Identification Number (UAN).

UAN has been made mandatory for all employees and will help in managing the EPF account and even PF transfer and withdrawals will become much easier than before.

9. The importance of five years of continuous service: The EPF withdrawal is not taxable if one has completed at least five years of continuous service. If one has switched jobs in less than five years but transferred the EPF to the new employer, it will be counted as continuous service. It is, therefore, better to transfer your existing PF to your new employer.

10. Tax on early withdrawals: Withdrawing the PF balance without completing five continuous years of service has tax implications. The total employer’s contribution amount along with the interest earned will get taxable in the year of withdrawal. Also, the amount of deduction claimed under Section 80C on one’s own contribution will be added to one’s income in the year of withdrawal. In addition, the interest earned on one’s own contribution will also be subject to tax.

The government had introduced Tax Deducted at Source (TDS) on PF withdrawals in order to discourage premature withdrawals and promote long-term savings. No tax is deducted if the employee withdraws PF after five years. Also, TDS shall not be applicable in case of PF transfer from one account to another. From June 1, 2016, for TDS, the threshold limit of PF withdrawal has been raised from Rs 30,000 to Rs 50,000. TDS will be applicable at the rate of 10 per cent provided PAN card is submitted.