Latest Update - From April 1, 2022, Provident Fund (PF) accounts will be divided into two parts - taxable and non-taxable account. The Income earned in the current year gets taxed in the hands of the employee next year. So, the interest earned in your EPF account will get taxed in 2022-23, only if the contribution is above Rs. 2.5 lakh. Moreover, the tax will be levied only on the interest earned on the amount exceeding Rs. 2.5 lakh. The contribution amount does not become taxable.
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 EPF and the remaining
8.33% is diverted to your Employee’s Pension Scheme (EPS). 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, you can also check PF account balance and withdraw PF online.
EPF interest income above Rs. 2.5 lakh will be taxable.
The current interest rate of EPF is 8.5%.
The Employees’ Provident Fund Organisation (EPFO) is a statutory body incepted by the government of India that promotes employees to save funds for retirement. It was launched in 1951, EPFO is the country’s largest social security organization.
Here is a list of handful of services offered by the EPF member portal:
Employees and employers must first activate their UAN before logging into the portal of EPFO for employees and employers. The procedure for activating the UAN is straightforward and can be completed using the EPFO portal. A unique identifier (UAN) is assigned to each scheme participant. Employees can also find their UAN on their pay stubs or employers.
Below-mentioned are the steps for employees and employers to access the EPFO portal.
Employees should follow the steps below to log in to the EPFO portal:
The following is the procedure for employers to access the EPFO portal:
Employees can check their EPF balance on their phones by downloading the Unified Mobile Application for New-age Governance (UMANG) app.
Here are how you can use the mobile numbers for checking your EPF balance:
Members of the EPF can also check their balance by dialling 011-22901406 from their registered phone number. To use this service, the employee's PAN, Aadhaar, and Bank account number must all be linked to their UAN. If the above information isn't linked to the UAN, the employee can ask the employer to do so.
Employees who have activated their UAN can check their PF balance and last contribution by sending an SMS to 7738299899. EPFOHO UAN ENG is the format in which the SMS should be sent. The last three letters are the preferred language the employee would like to receive the information. Currently, Malayalam, Bengali, Telugu, Tamil, Marathi, Kannada, Punjabi, Gujarati, English, and Hindi are available.
The EPFO passbook capability allows members registered on the Unified Member Portal to view their Member Passbook. After 6 hours of registration at the UAN Member Portal, the Passbook will be available. Changes to the Unified Member Portal credentials will take effect after 6 hours on this portal. The entries that have been reconciled at the EPFO field offices will be in the passbook. Exempted Establishments Members, Settled Members, and InOperative Members will not be able to use the Passbook facility.
Talk to our investment specialist
The EPF calculator shows you how much money you'll have in your EPF account when you retire. You can figure out the lump-sum amount, including both your and your employer's contributions and the investment's accrued interest.
You can enter your present age, EPF contribution, basic monthly pay and dearness allowance, and your retirement age up to 58 years in the EPF calculator's formula box. The EPF calculator will then reflect the EPF funds available at retirement.
Let's check an example to see how the EPF calculator works:
Suppose the employees' basic pay plus dearness allowance is Rs 14,000 per month.
For 2020-21, the interest rate is set at 8.5%
The calculation is repeated for the following months.
Money in an EPF account cannot be withdrawn at any time. Employees can initiate a PF withdrawal claim by following the steps mentioned below on the EPFO member portal.
Individuals can quickly check the status of their claims once they have requested a withdrawal of PF funds. Employees can check the claim status from the EPFO portal by completing the steps below:
The EPFO also sends out SMS updates on their claims regularly. SMS will be sent with details such as the claim application and funds transfer to the employee's bank account.
To make your EPF investment a beneficial investment you need to follow certain principles mentioned below:
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%.
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 Rs. 15,000 and is retiring in the next 30 years, he/she can attain a return of Rs. 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.
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.
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.
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.
Retirement planning is essential for fulfilling your retirement goals. So, build your Employee Provident Fund corpus well to make your retirement a happy retirement. Invest well for a better future!
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.
A: In India, an employer must open an EPF account on behalf of the employee. No individual alone can open an EPF account.
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.
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.
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.
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.
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.
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.
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.
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.