Should You Opt for EPF – Benefits, Regulations, Lesser known Rules

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Employees should opt for EPF scheme, here is why? Know the benefits, withdrawal conditions, contribution, and tax benefits associated with EPF.

The Employee Provident Fund (EPF) scheme is extended to the employees by the employer and the scheme is maintained by the Employees’ Provident Fund Organization (EPFO). the motive if the scheme is to encourage savings habits among the employee on monthly basis. Therefore, a monthly practice of contribution from both employee and employer is made mandatory towards the EPF scheme in equal proportions of 12% of the basic salary and dearness allowance. The employer is liable to contribute 8.33% towards the Employee Pension Scheme.

All About EPF Contribution

The employer and employee make equal contributions to the EPF account in the following proportion:-

Employer – 12%

Employee – 12% to 10% (comprise of 3.67% EPF and 8.33% EPS)

Organizations with 20 or less than 20 employees /organizations are required to offer EPF benefits to the employees.

How to Avail EPF Facility?

In some organizations, employers give choices to the employee to opt for EP facility. If the employees choose to open an EPF account, the employer allots a UAN number to the employee through which they can visit the member website of EPF i.e. EPF e-SEWA/EPF Members Portal, and can log in to the EPF account through UAN.

What is UAN?

A Universal Account Number (UAN) is a 12-digit number provided to each member of the Employees’ Provided Fund Organisation (EPFO). Through UAN, an account holder can operate the EPF account.  UAN, the employee can easily withdraw and transfer funds.

EPF Tax Benefits

In addition to the savings that get accumulated over a period of time, there are tax benefits that can be availed through the EPF account. Take a look at some of the tax benefits as mentioned under:-

As per the Budget 2021, the government announced that if the deposits in EPF and VPF (Voluntary Provident Fund) exceed Rs. 2.5 Lakh in a financial year, then the interest earned on the contributions above Rs. 2.5 Lakh will be taxable.

Benefits of EPF Scheme

In addition, to the tax-benefit, there are several other benefits of the EPF scheme:-   

Long-Term Security: Through the EPF scheme, employees can accrue savings of a lifetime and the benefit can be accessed at the time of retirement when one becomes dependent.

Fund for Unseen Circumstances: The EPF amount can be used by the employee in case of any emergency as the employee has an option of withdrawing the funds prematurely.

Security after Death: In case of the death of the employee, the dependents can collect EPF amount deposited by the employee.

Offers Pension Benefit: As mentioned above, an employer not only contributes towards the PF fund but also makes contributions towards pension which is of help for the post-retirement period.

Insurance Scheme: The EPF act also provides for employee’s life insurance where group insurance cover is not present. This scheme ensures that the employees are properly insured.

EPF Withdrawal Conditions

As per the rules, EPF can be partially or completely withdrawn by the employees. An employee can withdraw the complete amount being saved when he/she retires or is unemployed for more than 2 months.

Employees can also withdraw partial EPF under certain circumstances as specified by the employer and the EPF act.

*Disclaimer – The information provided above is only for information purposes to spread financial knowledge and enhance literacy among our readers. It shouldn’t be taken as financial advice by anyone.

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