What you need to know about the Employee Provident Fund – EPF

When I started working my employer asked me to fill this form and started deducting a part of my salary towards EPF. Little did I know the long term financial implications of such a deduction. So I decided to prod a little deeper.

What is EPF?

  • It is a social security scheme run by Employees Provident Fund of India (EPFO) under the ministry of Labour and Employement. It is an investment made by saving a part of salary for use during contingencies or after retirement.
  • Every employee needs to submit Form 11 when he or she joins and organization covered under the EPF scheme of 1952. You can choose to opt for it at the start of your career. However, once you choose to invest, you cannot opt out. Under present rules, once activated your account would be active unless you change your job and your new organization is not be covered by EPF rules.
  • It is applicable to salaried persons; Mandatory for those earning basic salary up to 15000; Optional for those earning above it.
  • Applicable to organisations with 20 or more people under law.

The finer details

  • Both employee and employer contribute towards EPF. It has two main components. EPF (employee pension fund) and EPS (employee pension scheme- contribution capped at Rs. 1250@ 8.33 %of 15000, the rest goes to EPF if your basic is more than 15000).  See table.
  • Contribution by EPF EPS EDLI EPF
    Admin charges
    Admin Charges
    Employee 12% 0 0 0 0
    Employer 3.67% 8.33% 0.5% 0.85% 0.01%

  • You can contribute more than 12% of basic pay(+ Dearness Allowance DA if applicable) but your employer won’t be matching this extra contribution.
  • Every year EPFO announces interest that would be earned on your account. EPFO has decided to reduce interest rate on the EPF to 8.65% from 8.8% a year earlier. The compounded interest is earned only on EPF part. Interest is calculated on opening balance at the beginning of a particular month but is added to your EPF balance at the end of the year.
  • The account is transferable when you shift jobs. You should provide your EPF’s universal account number (UAN) number to your employer for further contributions.
  • You can now apply online for such transfers.
  • Some companies may run EPF private trusts that are recognized by EPFO. They work like EPF and manage their own employees money. Such employers are exempted from filing PF returns. That gives at least the same interest as EPF does.
  • As per the notification issued by the EPFO on Nov 11, 2016 an inoperative EPF account (an account lying dormant for more than 36 months) will now continue to accrue interest unless the concerned employee applies for withdrawal of the accumulated balance.
    unless the employee concerned applies for withdrawal of the accumulated balance in his EPF account

    unless the employee concerned applies for withdrawal of the accumulated balance in his EPF account

    unless the employee concerned applies for withdrawal of the accumulated balance in his EPF account

EPF returns and tax liability

  • Till now you earned an interest on your balance at fixed rate as declared by EPFO for each financial year.( they invest in debt and government securities). Last financial year a small part of money was invested in the stock markets.
  • The tax liability of EPF is EEE. That means that the amount invested, the interest earned and the maturity amount, all are tax exempt
    • E(employees contribution is exempt under 80C) (employers contribution is fully tax free) 
    • E(interest earned)
    • E(withdrawal or maturity)
      • Withdrawing before 5 years will nullify the tax benefit availed under 80C and employers contribution too would be calculated as income.
      • TDS will be cut on withdrawal from EPF if it is fine before 5 years of working life. However, no TDS will be cut for withdrawals up to 50,000. (However it is taxable).

When can you withdraw the EPF amount

  • Whole corpus cannot be withdrawn under new rules under any circumstance before retirement.
  • The maximum you can withdraw is your contribution and interest. ( Employers contribution part can be withdrawn only after retirement)
  • If you are jobless for at least two months (form 19) then you could withdraw the corpus earlier (full) but now full corpus cannot be withdrawn. You can withdraw partial amount mentioned above.
  • EPF cannot be withdrawn before 5 years of completed service except on special occasions such as –   
    • education, marriage, illness of dependents (6 times the salary);
    • 50% corpus can be withdrawn up to 3 times after 7 years of completion;
    • prepaying home loan or repairing horse after completing 10 years of service (up to 36 times the salary);
    • altering house after 5 years of completion
  • Immediate withdrawals (without waiting for a period of two months) are allowed
    • if you have landed a job  abroad.
    • female employee getting married with adequate proof.
  • 90% of the accumulated corpus can be withdrawn on attaining 57 yrs of age.


  • This part of your employer’s contribution gets you pension-
  • on completion of 20 years of service (superannuation at 58 or just ceasing to work)
  • Short service pension to those who have worked for more than 10yrs but less than 20yrs.
  • You receive monthly pension only after completing 10 years in service and attaining age of 58.
  • Pension under scheme varies between Rs. 1000 to Rs.7500.
  • Those who started job after 1 Sep 2014 and earning more than Rs.15,000 in basic and DA will not be contributing to the EPS or Pension scheme.


  • It is a lumpsum payment to nominated beneficiary in event of death of employee due to natural causes, illness or accident (while working).
  • It is computed as 30 times the last basic salary drawn) (capped at Rs.15000) and 1.5 lakh as bonus so maximum is 6 lakh.

EPF app and online account

  • Government has developed an app for EPF For  employees and employees. Going digital has made it easier for both to handle EPF related activities. Employee can use it for balance enquiry, transfer, withdrawal. In my next blog, I will tell you 4 easy ways to keep a tab on your PF balance.

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