EPFO: Understanding the Scheme and Benefits

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Several savings plans and schemes have been introduced for the benefit of saving for individuals. These schemes have been launched by different organisations on behalf of the Government of India. The Employees’ Provident Fund (EPF) is one such scheme. This scheme has been introduced by the EPFO or the Employees’ Provident Fund Organisation and has gained popularity due to its key feature of being an assured and safe savings scheme (as it is supervised by the Indian government. 

Some Basics About the Scheme

Created by the EPFO, EPF is a scheme in which the employer contributes 12% of the employee’s basic salary (with dearness allowance) towards a saving plan, and the employee contributes the same amount. This amount contributed earns an interest of 8.15% per annum. The interest that is accrued on any EPF deposits is free from any tax liability (with some restrictions in place) and it can be withdrawn without any tax on the same. Employees under the EPF scheme receive a lump sum amount at their retirement and this includes the accrued interest. 

If you are a salaried individual and are eligible to avail of the EPF scheme, you can easily access the EPFO portal and gain some knowledge and information about your EPF. This makes any transactions hassle-free and transparent, and you can track your EPF payments and plan your financial goals accordingly. 

EPFO Schemes Offered

The Employees’ Provident Fund Organisation or the EPFO was founded in 1951. It is governed by the Indian government and falls within the Ministry of Labour and Employment. The EPFO is a non-constitutional body that largely promotes the saving of capital by employees with the goal of collecting a corpus for retirement. Under the EPFO, there are key sub-plans/schemes that are available to employees and you can find out more information about these on the EPFO home page: 

  • The EPF or Employees’ Provident Fund Scheme (1952)
  • The EDLI or the Employees’ Deposit Linked Insurance Scheme (1976)
  • The EPS or Employees’ Pension Scheme (1995)

What are the Objectives of the EPFO?

The Employees’ Provident Fund Organisation (EPFO) was set up with certain goals in mind. Here are the objectives of the EPFO:

  • To ensure that every employee has only one Employee Provident Fund account.
  • To make sure that compliance is as easy as possible to understand and execute.
  • To ensure that companies and organisations follow each rule set forth by the EPFO on a regular basis. 
  • To make sure that all accounts of members are easily accessible online.
  • To assure employees that claim settlement periods will be reduced from 20 days to just 3 days. 
  • To encourage and promote compliance on a voluntary basis. 

The EPFO Portal and the UAN

All those employees who have subscribed to the EPF scheme enjoy online access to their EPF accounts via the EPFO portal. They may conduct such activities as checking their EPF balance and making withdrawals. Every EPF member is assigned a UAN (Universal Account Number) which is a 12-digit ID. In the event any employee changes their employer, the Universal Account Number stays the same. 

The UAN has a role to play in streamlining access to and operations on the EPFO portal. In case a member wants to log in to the EPFO home page and gain access to their account after changing jobs, they can do so with ease. Although the member ID may have changed (as there is a new employer), they are able to log in as any changes made are reflected in the same UAN. Nonetheless, when an employee is allocated a UAN, this must be activated for all future activities to be conducted on the portal smoothly. 

Who is Eligible for the EPF Scheme?

Employees must meet certain eligibility requirements to avail of the EPF scheme, and these are mentioned below: 

  • Any organisation or company that employs 20 people or more is eligible to avail of the EPF scheme and extend the same to its employees. 
  • The EPF scheme is open to employees of Private and Public Sector companies, and this translates to the fact that the EPF scheme is open to all Indian employees. 
  • Once an employee becomes a member of the EPF, they are able to avail themselves of many benefits like pension benefits and insurance benefits, as mandated by the EPFO. 

EPF Interest and Taxation

If you are a salaried employee and are part of the EPF scheme, you should be aware of interest rates and any updates on the same. As far as the Financial Year 2023-2024 goes, the pre-determined interest rate offered by the EPFO stands at 8.15% per year. The interest on any EPF account is credited to the employee’s account only after the completion of the financial year. In terms of taxation, if an employee holds an EPF account right till they retire, then the maturity amount is not taxed. Nonetheless, if an employee withdraws from an EPF account before 5 years of continuous service, then TDS is deducted. Furthermore, when the amount is under Rs. 50,000, no TDS applies. 

It is important to note that any interest that is earned on the employee’s contribution towards the EPF is free from taxation unless the amount is above Rs. 2.5 lakh per year. If it exceeds this amount, then taxation will apply at the hands of the employee according to their tax slab. This threshold, however, has been raised to Rs. 5 lakhs in case an employer does not contribute to the EPF at all. 

If you wish to calculate your EPF interest and know about your taxation with regard to your EPF, you can easily use an online EPF calculator for the same (taking the retirement age at 58 years). One of the benefits of having an EPF online account is that operations on the EPFO portal are seamless and quick. 

Other Useful Information About EPF

When you have an EPF account, you should be informed about all the nuances of the account and what holding such an account entails. Here are some points to note: 

  • In case you wish to process any activities on the EPFO portal, you will need different kinds of EPF forms. These are available on the portal once you have reached the EPFO home page and are logged in. For instance, Form 2 is used if you wish to add a nominee to an EPF account, and Form 5 is used for registration. 
  • If you wish to transfer your EPF (in case you change your job/employer), you may do so online using your UAN. 

Final Words

Holding an EPF account has many benefits for salaried employees. Although this may not be the only retirement corpus you depend on, it is a nice bonus to have as aprt of your retirement fund. Additionally, you get the advantage of saving on tax, and the benefit of saving a small portion of your salary. Furthermore, with easy withdrawal regulations, you also have funds at your disposal for any unforeseen expenses.

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