Top 10 questions on EPF with Answers

The EPF (Employees' Provident Fund) is the most popular investment for salaried individuals, and is maintained solely by the Employees' Provident Fund Organisation of India (EPFO). As a rule, any company having more than 20 employees has to register with the EPFO. 

We bring you the top 10 frequently asked questions with answers on EPF: 

1. Is contribution to the EPF mandatory?
   
   For those who have a basic salary of up to Rs. 6500, contributing to the EPF is mandatory. Contributions are voluntary for those whose basic salary exceeds Rs. 6,500. However, it is strongly recommended to make such contributions to avail of the various benefits an EPF account has in store.
   
2. What should I do when I change my job? And what should be done when I quit my job without joining elsewhere?
   
   At such times, the PF balance could be transferred from one employer to another. The existing balance would continue to stay, with fresh contributions made by the new employer. When you quit your job, the PF could be withdrawn. You need to provide a declaration that you do not intend to work for the next six months.
   
3. EPF vs PPF - Which is better?
   
   EPF and Public Provident Fund (PPF) are long term investment instruments for retirement. However, a lot of people are confused between these two. The PPF is a statutory scheme of the central government started with the objective of providing old age income security to the unorganized sector workers and self-employed persons. The EPF is a retirement benefit applicable only for salaried employees. It is a fund to which an employee and employer contribute 12 per cent every month (Pre-set by the government of India) of the employee's basic salary. Every year, the employer deposits with the EPFO the contribution from the employer and the employee. Knowingly or unknowingly, 24 per cent of your basic salary is saved every month.
   
4. Change in EPF rules:
   
   As per the new 2012 rules issued recently, the EPFO has made amendments to the way in which employee and employer contribution would be calculated hereon. For employees, this amendment is particularly important as it impacts his/her take home salary and income tax liability as well.
   
   A quick look at the amendment: Change in salary definition - Previously, the term 'salary' for computing EPF contribution included basic  DA (dearness allowance). As per the new rules, 'salary' will include basic  DA  allowances that are ordinarily, necessarily and uniformly paid to employees. For example, suppose your monthly salary particulars are as follows - basic: Rs. 30,000 p.m., conveyance allowance: Rs. 5,000 p.m., medical allowance: Rs. 5,000 p.m. As per previous EPF rules, an amount of 12 per cent on basic (Rs. 30,000), i.e., Rs. 3,600 was the employee's contribution. As per the new rules, an amount of 12 per cent on basic  allowances (Rs. 40,000), i.e., Rs. 4,800 would form the employee's contribution.
   
5. Where does my monthly EPF contribution go and what is the break-up of the contribution to the above schemes?
   
   An employee's monthly contribution would go into the following three schemes as per EPF Act, 1952: EPF, 1952; EDLIS (Employees' Deposit Linked Insurance Scheme), 1976, and EPS (Employees' Pension Scheme), 1995.
   
6. What is the current interest rate on EPF Account?
   
   The Central government revises EPF interest rates every year depending upon the revenues made by EPFO on its previous years' deposits. For FY13, the EPF interest rate is 8.50 per cent.
   
7. How do I check my EPF account statement online?
   
   EPF members can access their account statements online at www.epfindia.gov.in. This facility is available only to active members who are currently contributing to their EPF accounts.
   
8. When can I withdraw my EPF money?
   
   You can withdraw from your EPF account on the account your children's education, marriage of self, children and siblings, purchase/construction of a house, or any medical emergencies. However, withdrawal is subject to certain conditions, non-compliance of which would result in penal interest: You should have completed minimum seven years of service; withdrawal can be made only three times in the period during which you hold the EPF account, and the maximum aggregate withdrawal would be 50 per cent of the total contributions made by you.
   
   For medical emergencies, there is no minimum service period. However, the maximum amount one can withdraw is six times the basic salary and proof of hospitalization is required.
   
   Withdrawal from EPF account for purchase/construction of a house is available only once in an individual's entire working life. The minimum service period is five years and the maximum withdrawal amount is 36 times your total salary (for construction of property) and 24 times (for purchase of property).
   
9. Can I contribute more than 12 per cent of my basic salary towards EPF?
   
   Yes, you can. The additional contribution is known as voluntary contribution. But such additional contribution will not be matched by your employer. All the same rules and interest rate will apply to your voluntary contribution regarding withdrawal, transfer, interest rate, etc.
   
10. How to locate an EPFO office in case of any grievances?
    
    
    You can locate the office at this URL: http://www.epfindia.com/jurisdictionNew.asp

Life Insurance: EPFO Creates Term Insurance Option

Life Insurance: EPFO Creates Term Insurance Option

The Employees’ Provident Fund Organisation (EPFO) has engaged Edelweiss Tokio Life Insurance to provide the group term insurance plan in lieu of Employees’ Deposit Linked Insurance (EDLI) Scheme 1976 which may lead to a higher group insurance of Rs1.32 lakh for each employee. Under the existing scheme, an EPFO subscriber gets insurance cover of up to Rs1 lakh before superannuation. 

Employers contribute 0.5% of basic pay of an employee as insurance premium to the EDLI scheme every month. The benefit under the scheme is given on the basis of the provident fund balance in the subscriber’s account. The subscriber gets the benefit equivalent to the PF account balance if the balance is up to Rs50,000. If the balance exceeds Rs50,000, the benefit is to the tune of the account balance plus 40% of balance, subject to maximum of Rs1 lakh. 

Meanwhile, the finance ministry has approved 8.5% interest for PF for 2012-13, up from 8.25% in the previous year, for over 50 million EPFO subscribers. EPFO is supposed to announce the rate of interest on PF deposits before the beginning of a financial year. However, for the past few years, there has been delay in announcement of rates. This time, the rate of interest has been notified after the end of the financial year. In the absence of the notification, the claims are settled at the interest rate .

Clubbing of wages for PF to dampen investment sentiment: Ficci

Clubbing of wages for PF to dampen investment sentiment: Ficci

Industry body Ficci on Tuesday opposed any move to club allowances with the basic wages for PF deductions stating besides increasing financial burden on it and government, it will "dampen" investment sentiments.

"The proposal to renotify definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act 1952, has huge financial implications both for industry and the government", the industry body said in a statement.

"The move is ill-conceived and if brought into force will dampen business and investment sentiments," it said. "This may even be counterproductive to the Employees' Provident Fund Organization (EPFO) as organizations who are extending coverage to employees receiving salaries above Rs 6,500 may choose to opt out, depriving employees coverage under a globally renowned social security scheme," Ficci said.

According to the provisions of EPF scheme 1952, every employer has to contribute 12 percent of the basic pay and dearness allowance towards the PF deposits of workers every month. Thus with increase in basic wages, the employers' liability would increase.

Out of employers' 12 percent contribution, 8.33 percent is deposited into workers' Employees' Pension Scheme 1995 accounts.

Central Government also contributes 1.16 percent of the basic wages of workers toward their pension account. Therefore, the decision would also result in higher contribution by the central government towards workers' pension accounts.

At present, there are over 50 million subscribers of the scheme. EPFO has a corpus of over Rs 5 lakh crores in EPF and EPS schemes. As per the notification issued by the EPFO on November 30 last year, all allowance which are 'Ordinarily, Necessarily and Uniformly' paid to workers were to be clubbed with basic wages for the purpose of PF deductions.

However, the notification was put on hold later on. EPFO had constituted a committee comprising unionist and employers to deliberate on the issue. The panel had reportedly suggested allowing clubbing of wages with minor changes in the provisions to Labour Ministry. The final decision to notify the clubbing of wages, has not taken so far by the ministry.

The body feels that the introduction of a triple test-'Ordinarily, Necessarily and Uniformly'- for the purposes of defining basic wages will arm the field staff to use their discretion to put additional burden on employers.

EPFO bid to rejig Provident Fund may hit finance ministry wall

The Employees Provident Fund Organisation's (EPFO) proposal to club allowances with basic salary to calculate provident fund contribution could face a finance ministry roadblock. 

While clubbing various allowances can more than double the basic pay for a large section of employees, it will also increase the budgetary provisions for the EPF pension component to over R2,800 crore annually from R1,400 crore last fiscal, a labour ministry official told FE. 

At present, employees contribute 12% of their basic salary to the EPF, while the employer contribute 3.67% to EPF, 8.33% to employees pension scheme (EPS) and 0.5% to employees deposit link insurance scheme (EDLI). The government contributes 1.16% of the employee's basic salary to the EPS scheme. 
The finance ministry, which has not yet cleared a proposal of raising the minimum pension to R1,000 a month from the present R540 on the anticipation of an extra burden of R600 crore, is in no mood to approve the demand for re-defining compensation in this context to include all allowances apart from basic salary, which would raise its pension liability, even as the rate of contribution remains the same. 

The hike in basic salary may also not bode well with the EPFO as its pension liability will increase at a time when EPS scheme stares at a actuarial deficit of over R50,000 crore.

What the labour and finance ministries could agree to is to allow deduction of PF on the full compensation up to the minimum wage limit of R3,500 a month, without any splitting. This could result in a small increase in government pension liability, the official said. This will prevent companies from splitting minimum wages for evading PF payment. To curb firms from splitting wages into a multitude of allowances and commissions to evade PF contribution, the EPFO issued a circular last year that stipulated clubbing allowances paid "ordinarily, necessarily and uniformly" with the basic salary for calculating the provident fund contribution. But it created a furore as it implied a substantial reduction in take-home salary albeit the PF contribution would have gone up and the labour ministry later had to put the circular in abeyance. The ministry constituted a committee comprising EPFO officials, representative from trade unions and employers association to resolve the matter. The committee's report, which favoured the clubbing of allowances, was recently sent to the labour ministry for final vetting, sources said. 

Industry lobbies CII and FICCI have opposed the move as the rule change could raise the financial burden for the government and private companies. A hike in basic salary means the employers' contribution to EPF also goes up. Since, many companies are wary of changing the cost to the company (CTC), for the employees, the take-home amounts could come down. In case of public sector, the hike in basic salary means extra contribution from the employer -- which is either government or a PSU. 

"Organizations that are extending EPF coverage to employees receiving salaries above the mandatory EPF threshold of R 6,500 may choose to opt out, depriving the employees coverage under a globally renowned social security scheme. Most of the employees today join an organization above this statutory limit and they are voluntarily covered by the industry," said Ficci president Naina Lal Kidwai. 

While admitting the financial implication, All India Trade Union Congress national secretary DL Sachdev said the original demand was to amend the Unorganised Sector Workers Social Security Act to prevent splitting of minimum wages and paying PF on the entire minimum wages. Even that has been pending with the finance ministry, along with the proposal to raise the limit of basic salary to R15,000 from R6,500 for mandatory EPF coverage. 

A sudden jump in salary cost would only crimp the profit margin of India Inc ,already reeling under the worst slowdown in a decade. A lower take-home salary will also slash consumer demand and delay an early industrial recovery.

Functioning of EPFO

Functioning of EPFO

As on 31.03.2012, the total members of Employees’ Provident Fund are 8.55 crore and pensioners under Employees’ Pensions Scheme are 41.03 Lakh. The present composition of Central Board of Trustees (CBT), Employees’ Provident Fund (EPF) is Annexed. The composition of the CBT, EPF is as per Section 5A of the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952. As per clause (e) of sub-section (1) of Section 5A of the Employees’ Provident Fund & Miscellaneous Provisions  Act, 1952, ten persons representing employees in the establishments to which the Scheme applies, appointed by the Central Government after consultation with such organisations of employees as may be recognized by the Central Government in this behalf. The Employees and Employers contribute 12% and 3.67% of wages respectively, to the Provident Fund. In addition, the employers and Central Government contribute 8.33% and 1.16% of wages respectively, to the Pension Fund.   As per audited Balance Sheet of EPFO for the year 2011-12, total balance amount as on 31.03.2012 under the Employees’ Pension Scheme(EPS), 1995 is Rs.162980.03 Crore. As per latest figure (unreconciled), the balance in EPS, 95 as on 31.03.2013 is Rs.183,405.36 Crore, (on face value of securities), details of which are as follows: S.No. Category Amount (Rs. In Crore) 1. Central Government Securities   43,475.28 2. State Government Securities   21,690.92 3. Government Guaranteed Securities     4,640.30 4. Special Deposit Scheme     1,400.52 5. Public Account   63,593.44 6. Public Sector   39,255.64 7. Private Sector     9,349.26 Total 183,405.36 The interest accrued thereon during the last three years and current year is as under:- Year           Interest amount (Rs. In Crore) 2009-10                            9,532.34 2010-11                          10,888.49 2011-12                          13,315.80 2012-13                          14,416.65 (unaudited) This information was given by Minister of State for Labour & Employment Shri  Kodikunnil Suresh in the Lok  Sabha today in reply to a written question. ******                                                               List of Members of the CBT (EPF) as on date (a) Appointed under clause (a) of Sub-section (1) of Section 5A. 1.         CHAIRMAN Union Minister for Labour & Employment 2.         VICE-CHAIRMAN Minister of State for Labour & Employment (b) Representatives of the Central Government under clause (b) of sub- section (1) of Section 5-A (Member) 3.         Secretary, Ministry of Labour & Employment, Government of India 4.         Additional Secretary, Ministry of Labour & Employment, Government of India 5.         Joint Secretary, Social Security, Ministry of Labour & Employment, Government of India 6.         Representative from the Ministry of Finance, Government of India 7.         Financial Advisor, Ministry of Labour & Employment, Government of India (c) Representatives of State Governments under clause (c) of sub-section (1) of section 5A State Government Representatives (Member). 8.         Secretary to the Government of Andhra Pradesh, Labour & Employment Department. 9.         Secretary to the Government of Assam, Labour & Employment Department. 10.      Secretary to the Government of Bihar, D/o Labour & Employment. 11.      Secretary to the Government of Gujarat, Labour & Employment Department. 12.      Secretary to the Government of Haryana, Labour & Employment Department. 13.      Secretary to the Government of Karnataka, Labour Department. 14.      Principal Secretary to the Government of Madhya Pradesh, Labour Department. 15.      Secretary to the Government of Maharashtra Industry, Labour & Energy Department. 16.      Secretary to the Government of Orissa, Labour & Employment Department. 17.      Secretary to the Government of Punjab, Labour Department. 18.      Secretary to the Government of Rajasthan, Labour & Employment Department. 19.      Secretary to the Government of Tamil Nadu, Labour & Employment Department. 20.      Secretary to the Government of Uttar Pradesh, Labour Department. 21.      Secretary to the Government of West Bengal, Labour Department. 22.      Secretary to the Government of NCT of Delhi, Labour Department, Delhi. (d) Representatives of Employers under clause (d) of sub-section (1) of Section 5A (Member) 23.      ShriJ.P.Chaudhary, All India Organization of Employers, (Council of Indian Employers) 24.      Shri Ram S. Tarneja, Employer’s Federation of India, (Council of Indian Employers) 25.      ShriSharadPatil, Employees’ Federation of India, (Council of Indian Employers) 26.      Dr.U.D.Choubey, Director General, Scope (Council of Indian Employers) 27.      ShriSantoshSaraf, ASSOCHAM 28.      ShriSushantaSen, Confederation of Indian Industry 29.      Shri B.P. Pant, FICCI 30.      ShriBabulalTodi, AIMO 31.      ShriBadish Jindal, (FASII). 32.      Shri Ravi Wig, PHD Chamber of Commerce and Industry (e) Representatives of employees under clause (e) of sub-section (1) of Section 5A (Member) 33.      ShriGirishAwasthi, BMS 34.      ShriBaijNathRai, BMS 35.      Shri M. JagadishwaraRao, BMS 36.      Shri G. Sanjeeva Reddy, INTUC 37.      Shri Ashok Singh, INTUC 38.      Shri D.L. Sachdev, AITUC 39.      Shri A.D. Nagpal, HMS 40.      Shri A.K. Padmanabhan, CITU 41.      Shri Shankar Saha, UTUC(LS) 42.      Shri Ramen Pandey, INTUC Appointed under clause (aa) of sub-section (1) of section 5A 43.      Central Provident Fund Commissioner  – Ex officio Member