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A Complete Guide On EPF

  •  A Complete Guide On EPF

COVID-19 pandemic has resulted in an increasing number of EPF withdrawal claims, as many people have lost their jobs and are finding it difficult to survive. The pandemic has affected the Indian economy very badly, which can also be a matter of concern to the Employee Provident Fund Organisation (EPFO) for providing the funds to the employees who wish to withdraw their provident fund. We will provide you a detailed insight into the importance of EPF along with the withdrawal process.

What is EPF?

Employee Provident Fund (EPF) is the amount contributed by the employee and government for the employee to secure the future of the employee. It can be very useful for the employee after his/ her retirement. EPF is the savings of the employee, and it matures after retirement, but it can be withdrawn prematurely if the employee needs it.

It is the main scheme under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 of the Indian Constitution. The scheme is managed by the Employee Provident Fund Organisation (EPFO), which is one of the World's largest Social Security Organisations that maintains more than 19.34 crore accounts. EPF applies to every organisation that has more than 20 employees and can also apply to the organisation less than 20 employees on certain conditions.

According to the EPF scheme, an employee needs to pay a 12% of the salary towards the scheme, and the equal amount is deposited by the government, which can be withdrawn after retirement with an interest on the lump sum amount. From 12% of the employees' contribution, 3.67% goes into the EPF, whereas 8.33% goes into the Employee Pension Scheme (EPS). Employees also have an option to increase or decrease the amount of EPF according to their needs.

According to the rules of EPF, an employee whose salary is more than Rs. 15,000 per month at the time of joining is not eligible for the provident fund, but it is mandatory for the employee with a salary of less than Rs. 15,000 to become a member of EPFO. However, an employee can become eligible by obtaining the permission of the Assistant PF Commissioner and the employer.

Interest Rate of EPF

It is one of the most significant benefits of EPF as the contribution towards EPF by the employees earns interest every year. The money contributed by the employees to the EPF scheme is invested by the EPFO to earn compound interest on the amount. The current EPF interest rate is 8.50% per annum, which is reduced this year due to the pandemic crisis. Even though the EPF contribution is done on a monthly basis, the interest is calculated on a yearly basis. The amount is credited into the user's EPF account on April 1, every year, and only the EPF account earns the interest, not the EPS account.

Tax Benefits of EPF

Under the old tax rate, up to 12 percent, EPF contribution is eligible for deduction under Section 80C of Income Tax. Whereas according to the new rates, you are not eligible to claim deduction under 80C.

EPF Withdrawal Process

A final settlement can be done for an employee only after the retirement age of 55 years, but an employee who is close to his/ her retirement can withdraw up to 90% of the EPF amount. There are other instances also that can allow an employee to withdraw the amount before the retirement age.

Some of the instances are as follows:

  • If an employee is unemployed for two or more months.

  • If a salaried employee has found an overseas job.

  • If a salaried employee wants to settle abroad.

  • If a female employee leaves employment due to marriage.

  • If an employee has switched from salaried employee to a self-employed professional.

Partial withdrawal is also available under the following circumstances:

  • If an employee needs money for a medical emergency.

  • If an employee needs money for home repair or alterations.

  • If an employee needs money for education or marriage of themselves, children, or siblings.

  • If an employee has to pay the home loan. (Withdrawal can be done only after 10 years of EPF contribution)

  • An employee can withdraw 50% of EPF contributions up to three times within working life only after 7 years of EPF contribution.

Steps to withdraw EPF:

  • Visit the EPFO e-SEWA portal where you can log in by using your UAN and password. In case you have forgotten the password, then you can request an OTP on your mobile number to reset the password.

  • On the e-SEWA portal, check whether you have updated and linked your Aadhaar number to your UAN. If you haven't updated it, go to the “Manage tab on the portal and update it.

  • Further, go to the "Online Services" tab on the dashboard and click on ‘Claim (Form-31, 19 & 10C)’.

  • Then go to "I want to apply for" menu and choose an option from full withdrawal, partial withdrawal, or pension withdrawal.

  • Now your claim has been forwarded to your employer for approval, and as soon as it gets approved, the amount of the EPF gets credited into your account.

These are the simple steps to withdraw your EPF amount, which can help you to withdraw your EPF at any time using your EPF login. Choosing an online method of withdrawing EPF will eliminate the hectic paperwork and save time. You can also check your EPF claim status on the EPFO home.  After the approval of your claim by the employer, it takes 10 days for the amount to be transferred to your account.

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