Employee Provident Fund (EPF) is one of the most important and beneficial schemes for any employee. I learnt some of the best lessons on EPF, and I am here to spill the beans. So without further ado, let’s get right to the 12 best EPF lessons.
How to withdraw EPF amount using the UMANG app?
In this blog:
- What is EPF (Employees’ Provident Fund)?
- Who is eligible for an EPF (Employees’ Provident Fund) account?
- What is the new update in PF (Provident Fund)?
- Benefits of EPF (Employees Provident Fund)?
- What is an EPF (Employees Provident Fund) scheme?
- How is the EPF (Employees Provident Fund) contribution calculated on payroll?
- How to pay EPF (Employees Provident Fund)?
- What is the current EPF (Employees Provident Fund) interest rate?
- How is EPF (Employees Provident Fund) interest calculated?
- How to withdraw PF (Provident Fund) online using UAN?
- How to withdraw PF amount using the UMANG app?
- What is UAN?
- Digitization of EPFO (Employees Provident Fund Organisation)
Employees’ Provident Fund, abbreviated as EPF, was introduced by the Indian government. It is a savings scheme directed towards employees. EPF falls under the aegis of EPFO (Employees’ Provident Fund Organisation). The Employees’ Provident Fund and Miscellaneous Provisions Act of 1952 put forward EPF as its main scheme.
According to the EPF scheme, a working employee can contribute a certain amount towards the savings scheme. In doing so, the employer also has to contribute a similar amount towards said employee’s scheme. On retirement, the employer is benefitted by receiving the total lump sum amount deposited, paired with interest over the years.
Thus, the EPF scheme is made to induce a habit of savings within a salaried individual.
Also Read: Understanding salary structure in India
EPF can be accessed by employees working in public and private firms alike. Moreover, companies having more than 20 employees can go for an EPF scheme. But there are some exemptions to this rule. Hence, the scheme also covers certain enterprises having less than 20 employees. Apart from EPF benefits, an employee is also eligible to get pension and insurance benefits.
Eligibility for an EPF account can be based on the monthly salary of an employee. The eligibility criteria are as follows for employees earning-
- less than INR 15,000 per month: It is mandatory in such cases
- more than INR 15,000 per month: Such employees have to take permission from Assistant PF Commissioner to be eligible for an EPF account
Although, an employee has to stay an active member of the scheme for him to access the benefits. Additionally, residents of Jammu and Kashmir cannot avail of the EPF scheme.
I understand if you are afraid of falling behind on updates and trends. I and you are on the same train on this one. But you can safely put such worries behind when it comes to PF. Because have got the latest updates on for you. So keep reading!
AI in EPFO
In these testing times, it is not a shocker that withdrawal claims for PF accounts have been on the rise. In order to make withdrawal easier and faster, EPFO is making use of Artificial Intelligence (AI). As a result, PF account holders are being able to get their claims approved within 7 days. EPFO has claimed that incorporating automatic mode into their processes has led to settling 54% of the claims through it. Also, the EPFO has managed to take out withdrawal money within 3 days. This is in order to aid people who need the money. Additionally, the auto-mode has enabled the EPFO to settle over 80,000 claims each day. Moreover, everyday funds are getting deposited to PF accounts from EPFO’s fund of INR 270 crores.
Although the benefits of EPF are numerous, these are the top 7:-
Not only does EPF fall under tax exemptions under section 80C of the Income Tax Act, but also the interest gained on PF is exempted from tax. In the same light, an employee is exempted from paying taxes on EPF withdrawal on completion of service at an organization for 5 straight years.
Life insurance aids
Under the Employees Deposit Linked Insurance (EDLI) Scheme, the EPFO provides insurance benefits to all PF account holders. In case of the death of the insured employee, his nominee is eligible to receive a lump-sum amount from the employee’s PF. Further, the minimum and maximum limits for such insurance are INR 2.5 Lacs, and INR 6 Lacs respectively.
The amount which the employer contributes towards an employee’s EPF falls under the Employees’ Pension Scheme (EPS). As per the Employees’ Pension Scheme, 1995, the retirement fund body states that an employee is eligible for a lifelong pension if he surpasses a decade of membership by contribution.
Premature withdrawal option
After completion of 5-10 years of membership, an employee can avail to withdraw partial amounts from his PF. Although such withdrawals cannot be made for any reason whatsoever. Hence, there have to be specific needs for the claim, like medical issues, payment of home loans, and more.
Higher capital gains
The interest on the amount deposited at EPF is fixed by the PF online scheme. This results in increased gains in capital. Furthermore, on maturation, the PF extends certain rewards extended to an employee. This results in a boom in an employee’s funds. Hence, this increases the value of an employee’s assets, thus causing capital appreciations.
Funds in emergency
The funds in an EPF aid an employee to create a corpus for unforeseen circumstances in the future. During emergencies, a salaried employee can partially withdraw from his EPF account.
Higher credits from PF kitty
5-15% of an employee’s EPF is poured into Exchange Traded Funds (ETFs) by the EPFO. As a result, an employee can expect higher credit returns from their PF kitty, in the future. But these investments are not visible in EPF accounts. Neither are employees eligible to make changes in the amount invested. Moreover, it is mandatory to invest returns from PF kitty in certain areas such as government securities, debt instruments, etc. As a result, PF returns recede National Pension System’s (NPS) portrayals of the same. Hence, it gives employees all the more reason to make investments.
With the EPF scheme, an employee benefits after retirement. Henceforth, the employee will get the lump-sum along with the interest, of their PF account after his retirement. Otherwise, an employee can also withdraw from the fund during his service. Such withdrawals are considered advances, instead of loans.
The Employees’ Provident Fund Scheme is regulated by the following three acts:-
- Employees’ Provident Fund Scheme
- Employee Pension Scheme (EPS)
- Employee Deposit Linked Insurance Scheme
Calculation of EPF contribution
This is shown in the section below.
Calculation of EPS contribution
It is only payable by the employer. However, such contribution ceases when an employee exceeds 58 years of age. Moreover, the contribution also stops when a pensioner draws Reduced Pension, and re-joins as an employee. See the calculation here.
Calculation of EDLI contribution
It is fixed at a rate of 0.5% on the employee’s EPF salary. But the threshold for the maximum salary to be considered for contribution is capped at INR 15,000. Further, contributions are rounded to the nearest whole figure. For instance, the maximum EDLI contribution can be INR 75. More importantly, this contribution continues even after EPS contribution ceases on an employee surpassing 58 years of age.
Since the calculation on payroll can get complex to understand, I am going to consider INR 50,000 as a particular employee’s monthly EPF salary (basic salary+dearness).
- EPF Salary- It is the addition of an employee’s basic salary and dearness allowance
- Basic salary- Basic salary is the total amount paid to an employee before making any deductions on his salary
- Dearness allowance- It is a certain percentage of an employee’s basic salary which is accordance with the inflation rate
Now I will show you how to calculate EPF contribution on payroll. To calculate for yourself, replace the hypothetical EPF salary with the one on which you want to calculate contribution. Follow the given steps for easy calculation of EPF contribution.
Step 1: Calculate employee’s contribution towards EPF
Firstly, you have to calculate the contribution of the employee towards the provident fund. The current rate for employees’ contribution is 12%. Therefore, the employee’s contribution on INR 50,000 will be INR 6000.
Step 2: Find out employer’s contribution towards EPF
Secondly, you have to find out the employer’s contribution. The employer’s contribution has two divisions. One is the contribution to EPF, which is 3.67%. Hence, here it will amount to INR 1835.
Thirdly, the employer makes another contribution. This one goes towards the Employees’ Pension Scheme or EPS. The current rate for the same is 8.33%. As a result, it amounts to INR 4165.
Step 4: Figure out the employer’s contribution in EPS on the threshold income
Although the amount for employer’s contribution towards EPS is coming to INR 4165, an employer cannot contribute the entire amount. He can only contribute the amount equivalent to 8.33% of the threshold amount of INR 15,000. That is INR 1250. You can only deposit this amount as the employer’s contribution towards EPS.
Step 5: Calculate excess-contribution of the employer towards EPS above the threshold
Finally, you have to deduct the threshold amount from the total EPS contribution amount. Thus, the excess contribution is INR 2915. Club this amount with the employer’s contribution towards EPF. Hence, the contribution towards EPF by the employer totals to INR 4750.
Step 6: Add all contributions
In order to find out the total contribution made by the employer and the employer, just add them. So the total contribution is INR 12000, per month, for the said employee.
Note- As a rule for calculating EPF contribution, you have to round off all decimals to the nearest number.
A good HR and payroll software will make this work easier for you. How so? Simply by automating calculation and payment of contribution. To have first-hand experience of the same, get started for FREE with Asanify, today!
Losing sleep over not being able to make payment for EPF? I know what you’re thinking. It is an important scheme after all. You must be worrying about the consequences of missing out on the payment. After all, you don’t want to wash your hand off a good retirement scheme, and a corpus of funds. Let me help you by making online payment easier.
Online EPF payment
Follow these simple steps to make a hassle-free online payment:-
Step 1: Log in
Firstly, you need to open the official portal of EPFO, in your browser. To log in, you will need your Electronic Challan cum Returns (ECR) documents.
Step 2: Select ‘ECR Upload’
Next, click on ‘ECR Upload’ under ‘Payments’ option.
Step 3: Fill details
Thirdly, you need to fill some details like wage month, salary disbursal date, and rate of contribution, using the drop-down menu for each.
Step 4: Upload ECR
After that, you have to upload the ECR text file. If the upload is successful you will get a prompt reading “Upload Validation Successful’. Otherwise, the page will display ‘Error’.
Step 5: Verify TRRN
Next, you should be able to see the Temporary Return Reference Number (TRRN) on the screen. Further, you can note down the number. After that, click on ‘Verify’.
Step 6: Get a summary sheet
As the sixth step, click on ‘Prepare Challan’. Thereafter, you will receive the summary sheet for ECR.
Step 7: Generate challan
Now click on the ‘Generate Challan’ option under Admin/Inspection Charges.
Step 8: Proceed to payment
Next, click on ‘Finalise’. This, in turn, will lead you to the payments page.
Step 9: Choose the payment mode
Since you are making an online payment, select the ‘Online’ option for payment. After that, you can select any bank account of your choice.
Step 10: Make payment
As the final step, you will be redirected to the selected bank’s website. Thus, you can now make the actual payment via net banking.
The current EPF interest rate is fixed at 8.50% p.a. But to find the monthly interest rate, you need to divide 8.50 by 12. Therefore, the interest rate is 0.7083%, per month.
Who said mathematical calculations have to be uber complicated? I say it’s as easy as the next thing. Don’t believe me? Well, check out these simple steps to see for yourself.
Note- Here too, we are using a hypothetical amount of INR 50,000 to calculate the interest
Step 1: Add basic salary and dearness
First and foremost, you need to add an employee’s allowances to his basic salary. Here we are considering the added result to be INR 50,000.
Step 2: Calculate employee’s contribution towards EPF
As we have already seen while calculating contribution towards EPF, the employee’s contribution, in this case, will be INR 6000.
Step 3: Find employer’s contribution towards EPS
Here as well, going by the previous calculations, we know that employer’s contribution towards EPS is INR 1250.
Step 4: Calculate employer’s contribution towards EPF
Likewise, the employer’s contribution towards EPF is INR 4750.
Step 5: Find the total EPF contribution every month
Hence, the total EPF comes down to INR 12,000.
Step 6: Apply interest rate
The monthly interest rate is 0.7083%. However, interest is not to be calculated in the first month itself. It is so because an employee’s salary gets deposited at the end of the month. Additionally, by the second month, you will receive another contribution. So now the total amount of contribution is 24,000. Next, apply interest to this. Hence, the interest will amount to INR 16999. (24000*0.7083, rounded off). This interest amount will get added along with the next month’s contribution. The subsequent interest will be calculated on the added amount, and so forth.
The need to withdraw your funds may arise for several reasons. They can be emergencies, or even when an employee discontinues his service. In such cases, you need to fill a form for the withdrawal. Keep reading to know more about these forms.
Which form to fill for PF withdrawal?
Depending on the need for withdrawal, you may choose any of these forms:-
|Form 2||Form for declaration and nomination of EPF and EPS||Download here|
|Form 5||Registration of new employees and EPF and EPS||Download here|
|Form 5 IF||EDLI scheme’s claim||Download here|
|Form 10C||In order to claim withdrawal benefits/scheme certificate of EPS||Download here|
|Form 10D||For account transfer of EPF||Download here|
|Form 11||In order to claim pension per month, and for automatic transfer of EPF||Download here|
|Form 14||To buy LIC policy||Download here|
|Form 15G||For saving TDS on EPF’s interest income||Download here|
|Form 19||For final settlement of EPF||Download here|
|Form 20||For final settlement of EPF on an employee’s death||Download here|
|Form 31||For withdrawal of EPF||Download here|
How to fill an EPF form?
Don’t worry. It’s not as difficult as it sounds. Moreover, I am right here to lead you through the process.
Step 1: Log in to the UAN portal
Firstly, keep your UAN and password handy since you need to sign in to the UAN portal using those.
Step 2: Select claim option
Click on ‘Online Services’ on the top panel. Under it, you will get a drop-down menu. Click on ‘Claim (Form-31, 19 & 10C)’.
Step 3: Enter bank account number
Thirdly, in the next page you will be able to see member details. Here, you have to input the last four digits of your bank account number. Then click on ‘Verify’.
Step 4: Click on ‘Yes’
Next, give a nod to the certificate of undertaking by clicking on ‘Yes’.
Step 5: Select ‘Proceed for Online Claim’
In order to proceed further, you need to click on ‘Proceed for Online Claim’.
Step 6: Click on ‘PF Advance (Form 31)’
If you wish to withdraw funds online, click on ‘PF Advance (Form 31)’.
Step 7: Fill details
After that, you will be redirected to a new section of the form. Here, you have to fill details like the reason for which the employee needs the advance, the sum they wish to withdraw, and their address.
Step 8: Submit application
Next, you have to check the box beside certification. Now you can submit the application.
Step 9: Submit documents
As per the form selected, you have to provide scanned proof of documents.
Step 10: Employer’s approval
Finally, the employer has to approve of the withdrawal. With their green signal, the withdrawn amount will get transferred to the bank account of the employee.
How to check PF claim status?
In order to check the status of an employee’s PF claim through EPFO, follow these 5 simple steps:-
Step 1: Open portal
Firstly, you need to open the official portal of EPFO in your browser. Then click on ‘For Employees’ under ‘Our Services’.
Step 2: Know your PF status
Secondly select the option of ‘Know your PF Status’.
Step 3: Type UAN
Thirdly, you have to type in your UAN and also the captcha.
Step 4: Fill details
Next, you need to fill details like the state of your PF office, establishment code, Provident Fund account number. You also need to choose your PF Office from the drop-down menu.
How to withdraw PF amount using the UMANG app?
Umang app is a combined app that can be used for a variety of government e-services that includes tax filing, Aadhar, gas cylinder booking, Passport Seva and provident fund queries. EPF money can be withdrawn by PF account holders using the Umang app.
One’s UAN (universal account number) must be linked to Aadhar to withdraw funds from an EPF account.
Register for Umang app
1: Download Umang app from Google Play Store or Apple App store
2: Open the app and select “New User”
3: Enter your mobile number on the “Registration” screen and select “Proceed”. The mobile number verification page will appear.
4: Enter the OTP and set the MPIN. Click ‘Confirm MPIN’ after typing MPIN.
5: Select ‘Proceed,’ answer the security question, and then proceed.
6: Enter your Aadhar number if you want to link it, or click ‘Skip’ to get to the ‘Profile Information Screen,’ where you must fill out your profile information and then click ‘Save & Proceed.’
7: This completes the registration process and you will be redirected to the home screen.
How to withdraw EPF using Umang app
1: Open the Umang app and log in.
2: Select “All Services” from the drop-down menu and look for “EPFO.”
3: Select “Raise Claim” from the drop-down menu
4: Submit your EPF UAN number to generate OTP
5: Enter the onetime password
6: Select the type of withdrawal and complete the form
7: After submitting the request successfully, you will receive an acknowledgement slip or a claim reference number that you can use to track the status of your withdrawal request.
When can EPF amount be withdrawn?
The EPF amount can be withdrawn completely or partially based on the user’s needs. When a person retires or is unemployed for over 2 months, he or she can withdraw the balance completely. Partial withdrawal is permitted under certain conditions, such as medical reasons, loan repayments, marriage, purchase or construction of a house and renovation or reconstruction of a house, etc.
How Much Time Does It Take to Withdraw EPF?
It depends on the mode of withdrawal application. I mentioned these below –
- Online application for EPF withdrawal can take 3 working days.
- However, applications for EPF withdrawal offline can take up to 20 days for settlement.
How Many Times Can EPF Be Withdrawn?
Advance EPF withdrawals are permitted under certain circumstances and have specific limitations. These are discussed below.
- Individuals willing to withdraw EPF for marriage purposes can do so only 3 times.
- Individuals withdrawing EPF to purchase a plot or house or constructing a house can apply for a one-time EPF advance claim.
- In case of a medical emergency (before retirement), withdrawal has no definite limit.
- EPF withdrawal (advance) for funding post-matriculation education can be made 3 times.
Universal Account Number or UAN is the 12-digit unique number allotted to each individual employee by the EPFO. It is made with the aim to initiate a smooth transfer of funds from one employer to another when an employee changes his company. Hence, with the help of a UAN, there is no need to withdraw EPF. Moreover, it is a permanent number.
How can I get my UAN?
The procedure to generate UAN is short and simple.
Step 1: Open portal
Firstly, log in to the UAN number portal in your browser
Step 2: Click on UAN allotment link
Secondly, click on the UAN allotment link which is verified by Aadhar. You will get this at the bottom right corner of the page.
Step 3: Input Aadhar number
Thirdly, you need to enter the employee’s Aadhar number. Thereafter, an OTP will be sent to the contact number registered with the Aadhar card. Now enter the OTP. Finally, the UAN will be sent to the registered mobile number.
How can I activate my UAN?
In order to activate UAN:
- Firstly, go to the official website of EPFO. At the bottom right corner of the page, you will find the option ‘Activate UAN’. Click on it.
- Secondly, enter details like UAN, D.O.B. and mobile number. Also, enter the captcha.
- Thirdly, click on ‘Get Authorization Pin’.
- Next, an OTP will be sent to the mobile number. Click on ‘I Agree’ after reading the terms of the page. Now enter the OTP.
- Lastly, click on ‘Validate OTP and Activate UAN’.
What is EPFO?
Employees’ Provident Fund Organisation (EPFO) is a body which deals with retirement funds. It provides the option of Provident Fund, Pension, and Life Insurance to all working individuals in India. Hence, it provides Universal Social Security Coverage. At present, the EPFO holds 17.14 crore accounts. It is, in fact, one of the world’s largest organisations pertaining to social security.
Change brought by digitization
Yes, you read that right. EPFO is going digital! The major change brought about by digitization of the EPFO is definitely that of faster online service delivery. Further, this is an initiative under the ‘Digital India’ campaign. With the advent of digitization, the number of transactions has increased rapidly. In fact, it has swelled up to be double of what the statistics used to be. Needless to say, digitization of EPFO is a much sought after means, in the present scenario.
Besides online handling of transactions and linking of UAN, the EPFO launched a new mobile application ‘UMANG’. Additionally, digitization has also brought about a method for online PF returns and easy transfer of funds.
5 ways digitization will benefit employees
Easy transfer of PF
The most important benefit that employees will get out of digitisation is that of seamless transfer of funds. To explain if further, when an employee changes his job, he will no longer need to file for transfer of PF. The process will be automated by the EPFO.
The digitization process does away with the inconvenience for employees. Since all processes are digitized, it will lead to saving time and manual efforts of employees. The implementation of big data analysis, artificial intelligence, and machine learning will further push this process. As EPFO goes digital, it is advisable to employ a payroll software to manage calculation and payment contributions towards EPF.
EPFO is trying to go paper-free. Hence, as it goes without saying, this will naturally decrease paperwork for employees. Moreover, with online documents, the risk of losing and incurring physical damages to important paperwork will be significantly lesser.
The EPFO launched a new mobile application ‘UMANG’. The types of services rendered by the app are-
- Employee-centric services
- Employer-centric services
- Pensioner services
- e-KYC services
- General services
With this app, employees can avail PF services like viewing passbooks, and raising and tracking claims.
The CII (Confederation of Indian Industry) and EPFO have introduced a helpline portal completely dedicated to answering queries and solving issues by employees who are members of EPF. Thus, with a well-established communication channel, any issues faced by employees will get resolved faster. Additionally, a cloud HR software will help you be at the top of your game in doing away with employees’ issues.
No, an employer cannot reduce the wages of an employee on account of payment to EPF. In fact, such a practice is barred as per Section-12 of the EPF & MP Act,1952.
No, if an employee leaves the service he can no longer contribute to EPF. It is so because, besides the contribution made by an employer, an employer has to contribute too. With the absence of the latter, contributions to EPF cannot be made.
You can check your PF balance in one of the following ways:-
1. In the UMANG app
2. On the EPFO portal
3. By sending an ‘EPFOHO UAN ENG’ via SMS to 7738299899
4. By giving a missed call on 011-22901406
To download the EPF passbook:
1. Firstly, log in to the EPFO portal. Then go to the Member Passbook page.
2. Input the UAN and password. Then click on ‘Login’.
3. Under the option ‘Select Member ID to View Passbook’, choose the correct EPF member ID from the list.
4. Thus, the site will redirect you to a new page with your passbook displayed. You can download it as you like.
While becoming a member of the provident fund, an employee has to fill Nomination Form 2.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.