Understand your EPF

Understand your
“Employee
Provident Fund”:
• EPF,
• EPS,
• EDLIS

• Employee Provident Fund(EPF),

• Employee Pension Scheme(EPS),

• Employees Deposit Linked
Insurance Scheme (EDLIS)

What is Employee Provident Fund?
• A provident fund is created with a purpose
of providing financial security and stability to
elderly people.

• It’s purpose is to help employees save a
fraction of their salary every month, to be
used in an event that the employee is
temporarily or no longer fit to work or at
retirement.

• Employees Provident Fund Organisation (EPFO) is
one of the largest social security organizations in
the world in terms of members and volume of
financial transactions undertaken.

• EPFO is a statutory body of the Indian
Government under Labor and Employment
Ministry.

The Constitution of India under
“Directive Principles of State Policy”
provides that :
the State shall within the limits of its
economic capacity make effective
provision for securing the right to
work, to education and to public
assistance in cases of unemployment,
old-age, sickness & disablement and
undeserved want.

The Employees’ Provident Funds & Miscellaneous
Provisions Act, 1952 was came into force w.e.f. 4th
March,1952. Presently, the following three schemes
are in operation under the Acts:

1. Employees’ Provident Fund Scheme, (EPS)1952

2. Employees’ Deposit Linked Insurance
Scheme,(EDILS) 1976

3. Employees’ Pension Scheme, 1995 (replacing the
Employees’ Family Pension Scheme, 1971 (EPS)

Pension Schemes of EPFO
Family Pension Scheme 1971 (FPS-71).

 If member is alive, no pension
 If member is not alive , pension to spouse only
 Pension amount was also very small as the contribution
collected to the scheme is only 3.34% (1.67%x2) of the Wages
 This scheme ceased when the EPS-95 came into existence

Employees Pension Scheme 1995 (EPS-95).

 If member is alive, pension to member
 If member is not alive, Pension to to spouse and two children
below 25 years of age
 This scheme is applicable to all members who joined EPF after
15.11.1995

Employees’ Pension Scheme (EPS) of 1995 offers pension on disablement,
widow pension, and pension for nominees.
It is financed by diverting 8.33 percent of employer’s monthly contribution
from the EPF(restricted to 8.33% of 6500 or Rs. 541) and government’s
contribution of 1.17 percent of the worker’s monthly wages.

The purpose of the scheme is to provide for

1) Superannuation Pension: Member who has rendered eligible service of 20
years and retires on attaining the age of 58 years.

2) Retiring Pension: member who has rendered eligible service of 20 years and
retires or otherwise ceases to be in employment before attaining the age of 58
years.
3) Permanent Total Disablement Pension

4) Short service Pension: Member has to render eligible service of 10
years and more but less than 20 years.

Employees Deposit Linked Insurance Scheme (EDLIS)

• Under the EDLI scheme life insurance cover is provided to the PF
members.

• The cost of the scheme is borne by the employer but amount of
life coverage under this statutory scheme is very low (a maximum
amount of Rs. 60,000)

• Usually employers opt out of the EDLI scheme by going for group
insurance scheme which usually provides higher coverage to
employees without any increase in cost to the employer.

• EPF, EPS and EDLIS are calculated on Basic Salary, Dearness
allowances(DA), cash value of food concession and retaining
allowances if any.

Table below gives the rates of contribution of EPF,
EPS, EDLI, Admin charges in India.

Employee Employer
Scheme Name
contribution contribution

Employee provident fund 12% 3.67%

Employees’ Pension scheme 0 8.33%

Employees Deposit linked insurance 0 0.5%

EPF Administrative charges 0 1.1%

EDLIS Administrative charges 0 0.01%

• Employees drawing basic salary upto Rs 6500/- have to
compulsory contribute to the Provident fund and
employees drawing above Rs 6501/- have an option to
become member of the Provident Fund.
• It is beneficial for employees who draw salary above Rs
6501/- to become member of Provident Fund as it is
deducted from the salary before it is deposited on bank or
given hence compulsorily saving happens.
• Employee’s contribution is matched by Employer’s
contribution(till 12%) so extra money and it is helpful for
tax purpose too.
• The employer contribution is exempt from tax and
employee’s contribution is taxable but eligible for
deduction under section 80C of Income tax Act.

Calculation of Employees Provident Fund Contributions

Basic salary of Rs 3500 i.e. less than Rs 6500

Contribution Towards Calculation Amount
EPF Employees share 3500 x 12% 420
EPS Employer share 3500 x 8.33% 292
EPF employer share 3500 x 3.67% 128
EDLI charges 3500 x 0.5% 18
EPF Admin charges 3500 x 1.1% 39
EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)

Highest contribution method : Total deposited Rs. 1921.75 (Adopted by LWIN)

Basic salary Rs. 7500 i.e. above Rs 6500 Method-1
EPF employer share 7500 x 12% (-) 541 359
EDLI Admin charges 7500 x 0.01% 0.75 ( Round up to Rs 1/-)

Total Deposited Amount : Rs. 1785.65 < Rs. 1921.75


Total Deposited Amount : Rs. 1665.65 < Rs. 1785.65 < Rs. 1921.75


Interest on the PF accumulations

• Compound interest as declared by Central Govt. is
paid on the amount standing to the credit of an
employee as on 1st April every year.

• The EPF interest rate of India is decided by the
central government with the consultation of
Central Board of trustees.

THE EPF BENEFIT
How much you accumulate

How would I know the amount of accumulations in my PF account ?

• PF annual statement gives details about the PF accumulations.

• This statement is sent by the PF department on completion of
the financial year.

How would I know the amount of accumulations in my PF account ?

Is it also possible to check the EPF Account balance online?

www.epfindia.com/MembBal.html

You will get SMS alert from EPFO :

EE amount : Rs XXXXX and ER amount Rs:XXXXX as
on <Today’s Date>(Account updated upto Date).

• EE = Employee Contribution and ER = Employer
Contribution on date(shown in Account updated date)
mentioned in your SMS.

• It does not show current balance of PF Account as on
Today

Which form has to be filled while becoming
member of provident fund?

To become a member of the Employee
Provident Fund one has to fill

• Form 11 and
• Nomination Form (Form 2 Revised).

Can I voluntary contribute more than the statutory
limit to EPF?

• Additional amount (over and above 12%) to Provident Fund can
be deposited by depositing VPF (Voluntary Provident Fund).

• However, employer is not bound to do a matching contribution.
The employer is liable to pay contribution only on 6500 whatever
is the basic salary.

• This is called voluntary contribution and a Joint Declaration Form
needs to be filled up where the employer and the employee both
have to give a declaration as to the rate at which PF would be
deducted.

Pension Benefits
A employee can start receiving the pension under EPS only
after rendering a minimum service of 10 years and
attaining the age of 58/50 years.

After 50 Years and before 58 years early pension is payable
subject to discounting factor @ 4% for every year falling
short of 58 years

In case of death / disablement, the above restrictions
doesn’t apply.

Retirement Age as per PF Rules:

• In Employees Pension Fund Scheme, the age is 58 years. But for Provident
Fund no age is fixed. That means, an employee who has attained the age
of 58 ceases to be a member of Pension Scheme.

• At the same time, if an employee joins an organization after 58 years (as
there is no retirement age in private sector unless otherwise provided in
the Standing Orders) and if such an employee had not been a member of
Employees Provident Fund earlier, then he will be covered and he has to
contribute to PF.

• In such cases, the employer will contribute the entire 12% to his EPF
account and not as 8.33% to Pension Fund and the remaining 3.67% to
Provident Fund. In the similar way, if a member of provident fund who has
withdrawn his PF accumulations on attaining the age of 58 and or who is
in receipt of pension from the Employees Provident Fund Organisation,
joins a company, he will be exempted from contribution.

Pension Benefit
Lifelong pension is available to the member and upon his death
members of the family are entitled for the pension.

The monthly retiring pension is decided on the basis of
‘Pensionable Service’ and ‘Pensionable Salary’ and is worked out
as follows

Monthly pension = ( Pensionable salary*Pensionable
service)/70
• Pensionable Salary is the average contributing salary
immediately preceding 12 months from the date of exit from
the scheme, normally this would be limited to Rs 6,500 p.m.

• Pensionable Service cannot exceed 35 years

The amount of pension is meager.

If one would have invested Rs 541 in a
recurring deposit at the rate of 8% for 35
years one would get 12,49,263 as maturity
amount.

If this maturity amount is put in buying the
Pension plan and put the above amount Rs
12,49,263 with option as Annuity payable for
life, one would get montly pension of Rs
10,150 which is much more than Rs 3,250.

Less Known EPF Rules

1: You can also nominate someone for your EPF

• One very strange rule as per the Act is that
you can’t nominate your brother for EPF.

2 : No interest is given on EPS (pension part)

3: You might not get 100% of your EPF money
you always get 100% of your EPF
part, but for EPS there is separate rule
. There is something called Table
‘D’ , under which its mentioned how
much you get at the time of exit from
your job, there is a slab for each
completed year and you get n times of
your last drawn salary (depending on
the completed year of service) subject
to maximum to Rs 6,500 per month.
So if your salary in this case was Rs
30,000 per month, still you will be
given only 6,500 * 6.40 = Rs 41,600.

4: Withdrawing of EPF amount at job change is illegal

You can only withdraw your EPF money only if you
have no job at the time of withdrawing EPF and if 2
months have passed. Only transfer is allowed in case
you get a new job and you switch to it.

For your information you should know that if you got a
new job and took it and then you are applying for
withdrawal, its illegal as per law.

5: One can opt out of EPF if he wants

If one’s basic salary per month is more than Rs 6,500,
he has an option to opt out of EPF and not be part of
it. In which case he will get all his salary in hand
(without anything deducted every month).

If a person has been part of EPF even once in his life,
then he cant opt out of it.

6: Your EPF gives you some life insurance too
• Your organisation has to contribute 0.5% of your
monthly basic pay, capped at Rs 6,500, as premium
for your life cover under Employees’ Deposit Linked
Insurance (EDLI) scheme.

• The bad part of this EDLI scheme is that the life cover
under this option is very low and that’s maximum
amount of Rs. 60,000.

• For employees in small scale industries and small
cities, this amount of Rs 60,000 will still count
something.

7: You can use EPF money can be withdrawn at special occasions

1. Marriage or education of self, children or siblings
- You should have completed a minimum of seven years
of service.
- The maximum amount you can draw is 50% of your
contribution
- You can avail of it three times in your working life.
- You will have to submit the wedding invite or a
certified copy of the fee payable.


2. Medical treatment for Self or family
(spouse, children, dependent parents)
- For major surgical operations or for
TB, leprosy, paralysis, cancer, mental or heart
ailments
- The maximum amount you can draw is 6 times your
salary
- You must show proof of hospitalization for one
month or more with leave certificate for that period
from your employer.


3. Repay a housing loan for a house in the name of self,
spouse or owned jointly
- You should have completed at least 10 years of service.
- You are eligible to withdraw an amount that is up to 36
times your wages.
4. Alterations/repairs to an existing home for house in
the name of self, spouse or jointly
- You need a minimum service of five years (10 years for
repairs) after the house was built/bought.
- You can draw up to 12 times the wages, only once.


5. Construction or purchase of house or flat/site or
plot for self or spouse or joint ownership
- You should have completed at least five years of
service.
- The maximum amount you can avail of is 36 times
your wages. To buy a site or plot, the amount is 24
times your salary.
- Can be avail of it just once during the entire service.

Withdrawal or Transfer of Employee Provident Fund

• Legally it is mandatory to transfer EPF Account
at the time of job change. But, people generally
don’t do it; instead of transferring, they
withdraw the amount.

• In case of EPS, if the service period is less than
10 years, you’ve option to either withdraw your
corpus or get it transferred by obtaining a
‘Scheme Certificate’. Once, the service period
crosses 10 years, the withdrawal option ceases.

An EPF account holder can withdraw a
maximum of 90% of his EPF balance between
the later of the two—

(a) He has attained 54 years of age; or

(b) 1 year remaining for his actual
retirement.
In any of the above two cases, application has
to be submitted to the Provident Fund Office
in claim form number 19.

Tax implications, if I withdraw the EPF balance at the time of a
Job change?

In case you are a member of recognized provident fund
it depends on if contribution is over 5 years or not,
including transfers from different companies.

• An employee who has worked with X company for
say 3 years, then he resigned from that organisation
and joined Y company, wherein he worked for 2
years, then resigned from there to
join establishment for 2 years but during
these 7 years of service he has not withdrawn but
transferred his Employee provident fund, then we
say continuous service of 7 years.

Tax implications, if I withdraw the EPF balance at the time of a Job change?

• If you withdraw before completing a period of 5
years, then all your previous years income gets
recomputed as if the fund was unrecognized from
the very beginning (i.e., the tax benefits you received
on your own contribution u/s 80C/88 in earlier years
will get forfeited) and further the employer
contribution and interest received will be added to
your current income

• So the next time you think of withdrawing your PF,
you must as an individual also assess whether the
same is taxable or exempt.

Are Withdrawal of EPF and EPS related?
• EPS and EPF are not linked .

• You can withdraw the PF once you leave the organization after
filling Form 19.

• In case of EPS, if the service period is less than 10 years, you’ve
option to either withdraw your corpus or get it transferred by
obtaining a ‘Scheme Certificate’.

• Once, the service period crosses 10 years, the withdrawal option
ceases .

• For pension, withdarwal benefit, scheme certificate etc.
application should be through ex-employer.

Transfer of EPF account
• When an employee joins a new company and he
wishes to transfer his previous company provident
fund amount, he should inform the HR department or
Accounts department of the new company.

• The employer will issue Form 13, in which the
member has to fill the details of the previous
company like – name, address, provident fund
account number and address of the provident fund
office where the account was held.

• On Form 13, the signature of the previous employer
is not required.

Transfer of EPF account
• Once he fills the required details and submits it to the
current employer, the current employer will forward it
to the provident fund office for the transferring
process. The new regional PF office then gets in touch
with your previous regional PF office to effect the
transfer.

• The time taken for transferring the fund from one
account to other account normally takes about 30-40
days from date of submission.

What are Problems Faced in withdrawing /transferring EPF/EPS
and the remedies.
Some of the normal reasons for the problems are
quoted here below:

• Mismatch of Signature of the employer
• Mismatch of Signature of the member
• Mismatch of Provident Fund Account number of the member
• Incorrect bank account details furnished by the member
• Incorrect address given by member
• Mismatch of date of joining / resignation
• Communication from PF department while processing the request
would not have reached the employer
• Failure of employer to remit the PF amount recovered from members
to PF Account
• Member might have changed his / her official name and the same has
not been informed to the provident fund office
• Change in Authorised Signatory of the employer when the application
is in process

What if EPF is not transferred?

• The good news is that even if you don’t
transfer your previous balance, your
previous accounts are live and accessible.
You can withdraw or transfer the balance
to your current PF account

• However, remembering your employer and
your EPF number may not be easy. So, keep
all EPF slips.

“After a considerable waiting period,
EPFO (Employees’ Provident Fund
Organisation) will transfer funds to an
unclaimed deposit account. Your funds
will not earn interest during that period.

A better strategy is to remember to
transfer your account at the time of
changing jobs.”

RTI for EPF Withdrawal and Transfer issue

• One can file a RTI (Right to Information) if one
is unclear about what your EPF status is or if
one’s EPF transfer work has even started?
Why did one’s EPF money still not credited
in bank account etc etc…

• You can ask all these questions and you
should be getting the 100% right and clear
answers within 30 days. The only point here is
that you should be doing it the RIGHT way.

Before filing the RTI , a good idea
would be to file a :

EPF grievance redressal form online

http://epfigms.gov.in/

File RTI in 3 easy steps
Step 1: Buying a Postal Order of Rs 10 from Post Office
• It should be in favor of Accounts Officer of the Concerned EPFO Office. Like if you
are sending your EPF letter to Bangalore, the Rs. 10 postal order should be in
favor of Accounts Officer, EPFO, Bangalore. The fees can also be paid by demand
draft, but that would be expensive, better go for Postal order as it is commonly
used for RTI.

Step 2: Drafting your RTI letter
• The first step is to draft RTI letter for your EPF related queries. All you need to do
is write a letter on a normal paper (better take a very high quality A4 size paper).
Though there is no specific format for RTI application letter, still there are some
rules of drafting it.
• The letter subject should start as ”Application Form for Seeking Information
under RTI Act 2005″
• The letter should be addressed to Central Public Information Officer, Employees’
Provident Fund Organisation, (Provide Concerned PF office address). Refer to this
EPFO directory for exact address of PF office for your jurisdiction.

• Make sure you mention your Name, Address, Contact telephone number and
your Email id along with EPF account number.
• Now, put all your queries which you want to ask regarding your EPF (putting them
as bullet points is recommended)
• As a next thing, you should have a declaration - ”I do hereby declare that I am a
citizen of India. I request you to ensure that the information is provided before
the expiry of the 30 day period after you have received the application”
• Finally at the end of the letter, mention the proof of payment of fees as - Proof of
payment of application fee: Attached Indian Postal Order for Rs. 10 /-
dated dd/mm/yyyy favoring “Accounts Officer of EPFO” as application fee.
• And complete the letter by putting your Signature, Place and Date.
• Sign the letter and Put your Postal address
• Mention the payment details like Postal order number, issuing post office, date,
cash receipt details, etc., towards the end of your application

• Following is a sample RTI letter.

Step 3 : Send the RTI letter by Registered Post or Speed Post

• The final step is to send this RTI letter by Registered post only, as no courier is
accepted. Please make sure you keep the acknowledgement receipt carefully for
all the future communication (if any). It might be required by you.
• Once you complete the 3rd step, the RTI letter should reach the concerned
authority in few days and then within 30 days you should be getting the reply
within 30 days (as per RTI act).

When you file an RTI application, there are some important points
which you should remember depending on different state (viz.
applicable fee, length of application, content type etc.), because in
case you don’t take care of legal critical points, it would mean
rejection of your application and unnecessary work again.

• The employer should forward claim forms to PF authorities within
5 days of its receipt (Ref clause 72 5(a) of EPF Act.)
• Usually companies adopt their own internal HR system that they
compile all applications/forms of withdrawal and submit to
concerned PF office twice a month on specific dates.
• The PF office should be in a position to settle the claim within 30
days and credit the amount in bank a/c of the member in say 45
days.
• Redressal of grievance is within 30 days.
• You may obtain signature & seal of Astt. Commissioner of Labour
or Govt Labour Officer or Gazetted officer (in place of employer,
signature of gazetted officer is required in case of a closed
establishment), Manager of a bank, Member of the Central Board
of Trustees./committee/Regional Committee (Employees’
Provident Fund Organization), Magistrate/Post/Sub Post Master/
President of Village Panchayat/Notary Public and submit the same
to RPFC, with a letter as mentioned above.

Feedback Session.

Thank You!

Understand your EPF

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