There are two types of contributions :
1. Employee contribution
2. Employer contribution
As per EPF rules, 12% of an employee’s Basic Salary + Dearness Allowance is contributed to Employee Provident Fund account.
Same contribution is done from Employer’s side. From the employer’s EPF contribution, 8.33% goes towards the Employee Pension Scheme (EPS) and 3.67% to the PF Account of the employee.
The total amount of PF balance is calculated by the employee’s contribution, interest on total amount and the number of years of service
a. In the existing tax regime, an employer's contribution up to 12% of an employee's salary is exempted from tax. Also, EPF corpus withdrawal is exempted from tax but under certain conditions.
b. There is a Tax exemption on EPF corpus only if employee has contributed in EPF account for continuous 5 yrs and it is taxable if there is a break within 5 yrs.
c. If an employee completed at least five years of continuous service, withdrawal of Provident Fund is not taxable. If employee has switched jobs in before five years and transferred his PF to the new employer, it will be counted as continuous service.
d. Also, if employee works for 1year in one organisation and then joins another organisation. And if he transfers his PF balance on to the new employer where he continues to work for 4 years. Altogether, it will be continuous five years of service of the employee. Therefore, it’s better to transfer your existing PF to your new employer to save from tax deduction.
e. TDS is deducted on premature withdrawal of the EPF corpus, only in case if the amount is more than Rs. 50,000/-
f. If an employee provides his PAN number with the application, he will be paying a TDS of 10%; whereas a 30% TDS plus tax will have to paid if the employee fails to provide his PAN number
1. PF cannot be withdrawn during employments. An employee can withdraw his partial PF in the case of emergencies like medical emergency, house purchase or construction and higher education and is subject to limits depending on the reason.
2. As per the new rule, EPFO allows withdrawal of 75% of the EPF corpus after 1 month of unemployment. The remaining 25% can be transferred to a new EPF account when employee joins new organisation.
3. Member can withdraw PF only after 60 days from the termination of services or 60 days after the last contribution.
Following are the details required while withdrawing PF.
A. Universal Account Number (UAN)
The UAN is a 12-digit number allotted to employee who is contributing to EPF. This number is same for the multiple Member Ids allotted to an employee by different organizations and also remains same through the lifetime. The UAN will help in easy transfer and withdrawals of claims.
Activation of UAN
UAN activation is necessary to access the various information like total contribution in PF from employee and employer, PF claim status, update and change eKYC and total balance of PF in account.
B. Aadhar Card
It is mandatory to link Aadhar card to PF account. Aadhar card must be mentioned with correct name. The date of birth mentioned on Aadhar card must include day, month and year. Your mobile number must be linked with your Aadhar card.
C. Bank Account Details
The bank account should be only in the name of the PF holder while member is alive.
KYC means Know Your Customer / Know Your Client. This process is important for identification and address of the account holder. This process helps to ensure that PF account will not be be misused.
The KYC updation is a onetime process. It helps for identity verification of its subscribers through linking of the Universal Account Number (UAN) with the KYC details. KYC updation enables a account holder to avail online services through the unified members portal. One can file online claim for final withdrawal and advances.
Benefits of updating KYC documents on the EPFO portal
1. EPF account fund transfer will be faster and easier
2. You can claim withdrawals online
3. SMS updates on PF activation and similar activities
Following are the rules which need to be understood while withdrawing PF.
1. Money from the EPF account cannot be withdrawn during employment, unlike a bank account. EPF is a long-term retirement savings scheme. The money can be withdrawn only after retirement.
2. Partial withdrawal from EPF accounts is permitted in the case of an emergency like medical emergency, house purchase or construction, and higher education. PF can be withdraw partially, but it has some limits and that is also depends on some reasons.
3. Though the EPF can be withdrawn only after retirement, early retirement is not considered until the person reaches at the age of 55 yrs. EPFO (Employee Provident Fund Organization) allows withdrawal of 90% of the EPF before 1 yr of retirement, provided the person is not less than 54 yrs old.
4. If a person faces unemployment before retirement due to lock-down or retrenchment, he can withdraw PF. But person can apply for PF withdrawal after the 40 days of his last working day.
5. The EPF subscriber has to declare unemployment in order to withdraw the EPF amount and employer must have update exit date or last working date of employee in employee’s EPF account.
6. As per the new rule, EPFO allows withdrawal of 75% of the EPF corpus after 40 days of unemployment. The remaining 25% can be transferred to a new EPF account after joining new organization.
7. EPF corpus withdrawal is exempted from tax but with some conditions. If an employee contributes to the EPF account for 5 continuous years, tax exemption on EPF corpus is permitted.
8. Only The EPF amount is taxable if there is a break in the contribution to the account for 5 continuous years. In that case, the entire EPF amount will be considered as taxable income for that financial year.
9. If the entire withdrawal amount is less than Rs. 50,000, then TDS is not applicable. But Tax is deducted at source on premature withdrawal of the EPF corpus. If an employee provides PAN with the application, the applicable TDS rate is 10%. Otherwise, it is 30% plus tax. Form 15H/15G is a declaration form, which states that a person's total income is not taxable and TDS can be avoided.
10. Employee has to update KYCs and employer has to give approval for same, provided the employee's UAN and Aadhaar are linked.
Following are the conditions around which EPF is applicable –
EPF applicability for employers
Any company in which strength of employee is 20 or more EPF deduction must be there by law.
Even organizations with less than 20 employees, subject to certain conditions are deduction of EPF is applicable.
EPF applicability for employees
Any salaried employee whose monthly income is less than Rs. 15,000 needs to compulsorily be a member of the EPF.
An employee with a monthly income higher than Rs. 15,000 (the current prescribed limit) is eligible to become a member of the EPF if that employee gets approval from the Employer and Assistant PF Commissioner.
An employee can also choose option of EPF if his salary is higher than Rs. 15,000 per month and if they have never made any contribution to EPF. For this that employee has to fill Form 11, which is a self-declaration form which is provided by the EPFO.