You could be a private or public sector employee. You, as an employee, have given your time and efforts to work for the organisation. After contributing a considerable part of your life to your organisation, you would want to spend your post-retirement life tension free and without any financial challenges. The Employee Provident Fund (EPF) does just that.
Employee Provident Fund
It is a retirement benefits scheme that both private and public sector employees can avail. The Employees Provident Fund is managed and governed by the Employees Provident Fund Organisation. As per the Employees Provident Fund and Miscellaneous Provisions Act, it is compulsory for a company with more than 20 people employed to get registered with the Employees Provident Fund Organization.
The EPFO runs three schemes, namely,
- Employees' Pension Scheme (EPS),
- Employees’ Deposit Linked Insurance Scheme (EIS), and
- Employees' Provident Fund Scheme.
Let us learn more about the EPF scheme
The EPF scheme is available for all salaried employees of the organisation registered with EPFO. Any salaried employee who wants to create a post-retirement corpus can apply and register for the EPF account. It is compulsory for employees with a basic salary of less than Rs. 15000 to become a member of this scheme.
Also Read: EPF Interest Rate - Know What is the Calculation of PF Interest Rate & More
How does the EPF scheme operate?
- Once the employee becomes a member of this scheme, a fixed contribution of 12% of the basic salary and dearness allowance is deposited in the scheme both by the employer and the employee.
- The employee’s entire share directly goes to the EPF account. The employer’s share of contribution is divided into two parts. 8.33% of the employer’s contribution goes to the pension scheme, and only the balance of 3.67% is deposited in the EPF account.
- The EPF organisation will provide the total amount of contributions made by the employer and the employee and interest to the employee upon his or her retirement. Another point is that the employee cannot opt out of the scheme once they become its member.
What is the interest rate on PF?
- The interest rate on EPF is decided by the EPFO Central Board of Trustees and the Ministry of Finance.
- The interest rate varies from year to year. The rate for Financial Year 2020-21 is 8.5% per annum.
- The rate of interest applicable for a year is announced in the Official Gazette, and then the interest amount is credited to the EPF account of employees.
What is the maximum contribution that can be made to the EPF account?
The employee can voluntarily contribute more than 12% of basic salary and dearness allowance to the EPF account, but it can only be a maximum of 100% of the basic salary. The employer need not match such contributions made by the employee.
Calculation Of EPF Amount To Be Received At The Retirement
The lumpsum amount receivable by the employee can be calculated online using the EPF calculator. To calculate the amount using the EPF calculator, you need to enter the following details:
- Present age
- Basic Salary and Dearness Allowance
- Percentage of Employee Contribution
- Percentage of Employer’s Contribution
- Retirement age
- Current EPF balance, if available
- The interest rate applicable for the given Financial Year
After entering the above details, the calculator will compute the total amount that will be receivable upon reaching the retirement age. The calculator gives the result by processing the above details with the help of predetermined logic, functions and formula.
This example will give you an insight into how the amount of EPF will be calculated using the EPF calculator:
- Let us assume that an employee Mr Ram of ABC Ltd. earns a basic salary and dearness allowance of Rs. 12,000/- per month for the financial year 2020-21. His contribution towards EPF @ 12% is Rs. 1,440/- and his employers’ contribution to provident fund @ 3.67% is Rs. 440/-and to pension scheme @ 8.33 % is Rs1,000/-.
- Therefore, the total contribution to the provident fund of the employee for a month is Rs. 1,880/-.
- The interest rate on the provident fund applicable for the financial year 2020-21 is 8.5% per annum. Hence, the monthly interest earned on the total contribution of this month will be equal to Rs. 13.32 i.e. [(1880*12%)/12]. In this way, the EPF calculation will be done for the following months.
- With the help of the above example, you can understand that calculating the amount that you are going to get on retirement by just entering a few details can be easily done using online EPF calculators.
- The advantage of doing so is that it gives you an idea about the retirement fund that you will get so that you can make the correct decision about other investments to be made in other plans.
- It will also help you understand whether the retirement fund is sufficient as per your future requirements and if there is a need to take other retirement benefit schemes. If so, how much amount is to be contributed further to build the desired post-retirement fund. It can also help you to decide if you can opt for early retirement or not.
Important Features Of The Employee Provident Fund Scheme
- When an employee becomes a member of the provident fund scheme, a Universal Account Number (UAN) is issued. It is used for easy transfer and withdrawal of the EPF amount and checking your EPF details online.
- UAN allotted by the Employee Provident Fund Organisation is first required to be verified and updated by your employer. Only after this you can use it to access various EPF related service online. Universal Account Number (UAN) remains the same even if you switch your job. The employees must link the Aadhaar Number and the bank account with UAN.
- The employee can select one person as a nominee of his EPF account so that in case of his death, the amount of the EPF account is transferred to the nominee. You can also change the name of the nominee by filling the prescribed form to the human resource department of the company or to the Employee Provident Fund Organisation directly.
- Out of the total contribution made by the employer in the provident fund, 8.33% of the per month contribution is deposited in the pension scheme. This pension scheme provides a monthly pension to the employee after his retirement, subject to certain conditions.
- The amount of the provident fund account can be withdrawn only after retirement. However, some amount can be withdrawn in special situations such as medical emergency, higher education, based on some terms and conditions.
- The contribution made towards the provident fund provides a tax benefit. The contribution up to Rs. 1.5 lakhs is allowed as a deduction under section 80C of the Income Tax Act.
- The interest earned on provident contributions is also tax-free. From the financial year 2021-22, the interest on provident fund contribution of an amount greater than Rs. 2.5 lakhs per annum shall be chargeable to income tax.
How To Easily Check Your Employee Provident Fund Balance And Other Details
- Umang App
- This is one of the ways to check your EPF account details. Umang App is introduced by the government as another step towards making the processes more transparent and digital.
- It facilitates the users to access many government services from a single portal, thus reducing the time and efforts needed to search different sites for different purposes.
- All you have to do is simply download the app on your mobile phone, and after downloading it, you have to do a one-time registration on this app through your phone number. For registration, you will have to provide some basic information in the form, for example, PAN, Aadhar Card details, EPF account number, etc.
- After successful registration, you can use this app from anywhere to view your EPF passbook, which will show your account balance, interest and other details. You can also raise claims using this app and can also easily track its status.
Also Read: EPF Withdrawal Procedure - How to Withdraw PF Online? Application, Status
These are the few easy steps that will help you in keeping track of your EPF account balance and other details by just making a few clicks:
- First of all, visit the government EPF portal by typing this URL in your web browser - http://www.epfindia.gov.in
- Now you will see a page with many tabs and options. You have to click on ‘Services’ and click on ‘For Employees’.
- You will enter a page showing the number of options under the head ‘services’ such as member passbook, know your claim status, etc.
- If you want to know your Provident Fund account balance then, click on ‘Member Passbook’.
- A new page will open, which will ask you to either sign in or log in by directly entering your Universal Account Number (UAN) and the password. Always make sure that your provident fund account has been verified and activated by your employer.
- However, instead of following the above process, if you just want to see your EPF passbook, you can also directly copy-paste this link in your web browser - https://passbook.epfindia.gov.in/MemberPassBook/Login.
- The point to be noted here is that the facility to view passbook on the EPFO portal is only available for those members who are the employees of those organisations which are registered under the Employees Provident Fund Scheme, 1952.
- For availing of the service of knowing your contribution amount and balance in your EPF account, send an SMS from your mobile phone.
- However, you should make sure that your bank account, PAN and Aadhar card details are linked with your Universal Account Number (UAN), and your mobile number is registered with UAN.
- From your registered mobile number, type this message – EPFOHO UAN ENG and send this message to 7738299899.
- The users can avail this facility in English and Hindi, and 8 other languages, namely Gujarati, Marathi, Malayalam, Bengali, Tamil, Kannada, and Telugu. You need to type the first three characters of the language that you prefer in place of ENG in the text message as shown above.
Thus, by sending a simple text to the given number, you can quickly know your EPF account balance.
- Missed Call Services
- If your mobile number is registered with UAN, then you can give a missed call on this number – 011 22901406 from your registered mobile number to get the details of your Employee Provident Fund account balance. This is a free of charge service.
Also Read: How To Make TDS Payment Online?
Can You Transfer Your Employee Provident Fund In Case You Switch From One Job To Another?
The answer is yes. You can transfer your account balance online in case of a job change from your previous employer to your new employer. You should follow these steps to transfer your EPF money online:
- First, go to the official website of EPFO, then click on the Services tab and select ‘For employees’.
- You will see a list of services. Click on Members UAN/Online Services, and a new page will open, which will ask you to log in using your UAN and password.
- Enter your UAN and password to log in. After login, you will see a list of online services. Click on ‘One Member – One EPF Account (Transfer request)’.
- You should verify the personal information and the particulars of the Employee Provident Fund account with your present employer.
- Now you need to select details of your previous account by clicking on ‘Get details’.
- In the next step, you are required to choose either your previous employer or current employer, based on the availability of the digital signature certificate, to get the claim form attested.
- Finally, click on ‘Get OTP’, you will receive OTP on your registered mobile number, enter it and submit the request.
- The employer will digitally approve the transfer claim request by login as an employer on the EPFO portal.
- Also, download the hard copy of Form 13 in pdf format, including your PF number from both your previous and current employer, and submit the signed copy to the selected employer within 10 days of the online PF transfer claim.
Hope the above explanation proves to be helpful for you in getting a better understanding of Employee Provident Fund, its calculation using online PF calculators, online transfer of account from one employer to another and other related aspects.
The Employee Provident Fund is a secure and easy option to create a strong post-retirement fund so that you can relax and enjoy your post-retirement period. It also gives you tax benefits while you are in the service. It is a good option for both investment and tax-saving purposes. Also, the EPF account-related procedures have been made quick, easy and transparent by the government.