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What is Employee Provident Fund or EPF?

Updated on September 22, 2021 , 27695 views

Employee Provident Fund, commonly known as PF (Provident Fund), is a retirement benefits scheme that available for all salaried employees. Under this scheme, employees, as well as the employer contribute a certain amount from their basic salary (approx. 12%) in an EPF account. The entire 12% of your basic salary is invested in an Employee Provident Fund.

Out of 12% of the basic salary, 3.67% is invested in an Employee Provident Fund or EPF and the remaining 8.33% is diverted to your EPS or Employee’s Pension Scheme. Therefore, Employee Provident Fund is one of the best savings platforms that enable employees to save a part of their salary every month and use it after retirement. Nowadays, one can also check PF account balance and withdraw PF online.

EPF 2021 Budget Update

EPF interest Income above Rs 2.5 lakh will be taxable.

Employee Provident Fund OR EPF: Principles to Follow

To make your EPF investment a beneficial investment you need to follow certain principles. We have listed some of the basic principles below. Have a look!

Make a Regular EPF Payment: Never Opt-Out

  • The core of EPF scheme is its fixed monthly contribution. The fund is formulated by the regular monthly investments made by the employers and employees. In certain organisations, the employees are given an option to opt-out of contributing to Employee Provident Fund, though the employer’s contribution is mandatory.

  • Further, there is also a Voluntary Employee Provident Fund option, which allows the employees to invest more than 12% of their basic salary in this scheme to attain a better retirement corpus while the employer’s contribution remains the same i.e. 12%.

  • Also, by Investing in this scheme one can avail tax benefits under Section 80C of the income tax Act.

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Wait until Retirement for a Better Retirement Planning

  • One of the primary objectives of this scheme is to provide financial security to people post-retirement. If the investment corpus is allowed to grow properly, Employee Provident fund can provide high benefits in long run.

  • The EPF tax rules are strict, so when invested till retirement, they provide good returns. Let’s consider an example to understand it better. If an employee has a basic salary of INR 15,000 and is retiring in the next 30 years, he/she can attain a return of INR 1.72 crore at the time of retirement. The Power of Compounding of EPF plays a major role in attaining such high returns.

  • If properly utilised, Employee Provident Fund can solve the problem of fund requirement post-retirement.

Do not Rely on your PF Balance: Know Tax on PF Withdrawal

  • Some of the employees rely on PF balance to fulfil their short-term goals. Some also treat it as an emergency fund. If you are doing it as well, it is suggested to stop doing that immediately.

  • Though there is an option to avail a loan on your EPF balance, one must avoid taking that option.

  • Also, there are additional tax deductions on PF withdrawal. So, we must keep the PF amount safe for our retirement only.

Know the EPF Rules: Continue the Same PF Account During Job Change

  • Another important thing to know for your EPF account is that the employees have an option of continuing the same PF account. The PF account balance accumulated in the previous organisation’s account can be transferred to the account of the new organisation. So, you do not have to manage several accounts. The salary deductions from all the organisations get accumulated in a single account.

  • Also, if the PF amount is not transferred within 3 years of leaving the organisations, it becomes difficult procedure to follow. So, it is important to make sure that the accounts are clubbed together with a new account for a proper Capital appreciation.

Get Your Universal PF Account Number

  • Lastly, to avoid the hassle of transferring and managing multiple accounts of your previous organisations, it is advised to get your UAN (Unique Account Number). Now, you must be thinking what is UAN?

  • UAN or Universal account number is a number provided by the EPFO (Employee’s Employee Provident Fund Organization) that helps manage multiple accounts through a single portal. So, to ensure proper management of an EPF account, it is suggested to get a UAN number.


Understanding the differences between EPF and PPF can help you pick the best.

Here's a quick look-

Parameter EPF (Employees Provident Fund) PPF (Public Provident Fund)
Interest Rate 8.65% 7.60%
Tax Benefits Liable for deductions under section 80C Liable for deductions under section 80C
Period of Investing Up to retirement 15 years
Loan Availability Partial withdrawal available 50% withdrawal after 6 years
Employers Contribution (Basic + DA) 12% NA
Employees Contribution (Basic + DA) 12% NA
Taxation on Maturity Tax Free Tax Free

Retirement planning is essential for fulfilling your retirement goals. So, build your Employee Provident Fund or EPF corpus well to make your retirement a happy retirement. Invest well for a better future!


1. Who contributes to the EPF?

A: The employee and the employer both contribute directly to the EPF account. Along with the regular deposits, the government pays interest on the amount deposited.

2. Who can open an EPF?

A: In India, an employer must open an EPF account on behalf of the employee. No individual alone can open an EPF account.

3. Is it essential to have an EPF?

A: Yes, it is essential to have an EPF account. It will provide the employee with security on retirement. Additionally, it has tax benefits. The amount withdrawn from the EPF account on maturity exempted from Taxes. The taxpayer will also enjoy tax benefits under Section 80C on the amount deposited monthly in the EPF account. Similarly, the employer will enjoy tax benefits on the contributions made to the employees' EPF accounts. Thus, other than financial security on retirement, you should have an EPF account for tax management as well.

4. What is the EPF interest rate?

A: The present interest rate for EPF in India is 8.5%.

5. Should I opt out of EPF?

A: It would help if you never opted out of an EPF scheme. The EPF is for your financial security and to provide you with tax benefits. Hence, in the long run, the EPF can prove to be helpful.

6. What is UAN?

A: The Universal Account Number or the UAN is the permanent account number provided by the Employee Provident Fund Organization. It is a 12-digit account number that will remain the same irrespective of the firms you work. The UAN ensures that the EPF is genuine and records all the job changes.

7. Are there online facilities for EPF?

A: Yes, the EPFO has made it possible for individuals to check their respective EPF accounts online. For this, you have to log into the official website, register on the EPF portal, and create a password. You can then access your UAN, apply for a loan against your EPF account, update KYC, check balance, and even transfer money from the account.

8. Is EPF important post-retirement?

A: EPF is a security scheme that will make you financially secure post-retirement. Although you cannot contribute to the fund post-retirement, the fund is essential to ensure that your retirement is financially secure.

9. Who administers the EPF?

A: A Central Board of Trustees manages the EPF. The trustees consist of members representing the government, the employers, and the employees. The Employees Provident Fund Organisation or EPFO oversees the board's functioning and assists them in all their activities. The Ministry of Labour and Employment manages the EPFO.

10. Can withdrawals be made from EPF?

A: Yes, you can make withdrawals from your EPF account. Partial withdrawal is allowed only in case of medical emergencies, house purchases, or higher education. However, you will have to give a possible reason for the withdrawal, and it has t be accepted by the authorities. However, full withdrawal of the amount is allowed on retirement.

11. What is the EPFO portal?

A: The EPFO portal is an online system that allows individual account holders to access details about their accounts. It simplifies the entire method of maintaining and updating their respective EPF accounts. It has also made it easier for account holders transfer money. It also answers all queries related to the UAN.

All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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