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You must be contributing to EPF every month but you won’t know much about Employees’ Provident Fund or EPF. Therefore, today by means of this special blog, you’ll not get to know about the significant terms of EPF but also 10 vital things that you are required to know prior to making EPF withdrawal. Let’s get started with a brief of the EPF. 

What is EPF? 

Employees’ Provident Fund or EPF is a scheme managed by the government of India that promotes savings for employees within the service sector. Under this scheme, the employee has got to pay a certain amount of cash towards the scheme. The employer also contributes a similar amount and thereby the interest is paid on both viz. Contribution of employee and the employer. 

Now, let’s get started with the important terms that every employee should be aware of in general too as this will help them understand many things about their contribution towards EPF and several other aspects of EPF. 

1. UAN 

Universal Account Number (UAN) plays the most crucial role all across EPF. It is a 12-digit number that is provided to every member of the Employees’ Provided Fund Organisation (EPFO) using which s/he can manage his/her PF accounts. 

This number is generated by the Ministry of Employment and Labour. It facilitates the person to get all the details associated with his/her Provident Fund (PF) in one place notwithstanding the company s/he's functions. 

As a universal number, UAN helps a member to accumulate all the PF accounts linked with multiple IDs of various entities in one place. Using UAN, the employee can easily take out and carry out the transferring of funds. 

2. EPF withdrawal 

The Employees’ Provided Fund Organisation (EPFO) has set provisions for its members to claim their money from PF accounts online. In accordance with the new rules, the organization has made it mandatory for all the members to apply for the claims by online medium when the withdrawal amount exceeds Rs. 10 Lakhs. 

In case, the amount is up to Rs. 10 Lakhs, members are allowed to claim EPF balance by means of both the modes viz. Online and Offline. 

To carry out EPF balance claim online, the member will have to get his/her KYC documents (Aadhaar and PAN) digitally signed by the respective authorities such as UIDAI and IT Department. A member can apply for EPF balance withdrawal by filling claim forms 31, 19 and 10C. 

3. EPF Contribution 

Both the worker and the employer contribute to the EPF scheme equally. The employee contributes 12% of his/her combined total of basic pay, dearness allowance and retaining allowance. 

While the employer contributes 8.33% of the employer’s contribution is directed towards the Employees’ Pension Scheme. This amount is applicable for organisations possessing up to 20 employees. If the employee operates in a company possessing over 20 employees, the contribution for both parties is 10%. 

4. EPF Auto Transfer 

When an employee switches his/her job, the new company opens a replacement PF account for him/her. The employee has got to then transfer the funds from his/her previous EPF account to the replacement one. 

To carry out this, the member will have to fill in and submit the Form-13 Nevertheless, the Employees’ Provided Fund Organisation (EPFO) has established provisions by means of which the member is required to fill in a composite Form-11 for performing the transferring of the PF balance automatically into the new PF account. 

5. EPF interest rate 

The rate of interest offered by the EPFO to employees is currently 8.55%. The Ministry of Labour and Employment, Government of India has mitigated the interest rate for the present fiscal by 10 basis points. 

Additionally, the ministry also analyses the scenario and determines the rate of interest rendered to members for the subsequent fiscal year. The interest is computed based on the monthly running balance of the worker. 

6. Online Facilities 

EPFO has simplified the way of availing various services by EPF members. Members can simply log in to their EPF account using their UAN and enjoy a variety of services, i.e., EPF balance withdrawal, fund/account transfer, KYC updation, balance enquiry, etc. 

The employee can register on the EPF member portal using his UAN and set up a password. S/he can then login to his/her account to avail of the available online facilities. 

All the EPF online services don’t need to get any cost, therefore, the member can access them 24x7. Although, it is compulsory to submit PAN Card and Aadhaar Card prior to applying for the EPF balance claim or withdrawal online. 

7. Employees’ Provident Fund Advances 

The primary objective of EPF is to supply a considerable amount of cash to the employees at their retirement. Nevertheless, EPFO also enables members to take out funds prior to retirement. 

Such amount withdrawn is stated as EPF advances. Generally, the funds are often taken out for the following reasons – to buy a new house, to pay off the home loan, to meet medical requirements, and children’s wedding or education. 

The cash quantum that can be disbursed depends on certain criteria such as the number of years in commission, etc. It is not compulsory to pay off the quantity taken out. If you have linked your Aadhaar Card and PAN Card with your UAN, you can fill the form online at the EPF member portal and apply for the claim of your PF balance without asking for approval from your employer. 

EPF Interest Rate FY- 2021-2022 

The EPF interest rate is reviewed every year. For FY 2021-22, the EPF interest rate is 8.50%. When EPFO announces the interest rate for a financial year, it is computed for the month-by-month closing balance and then for the entire year. 

Here are a few key points to remember about the EPF Interest Rate: 

• The interest rate offered at 8.50% is valid and will only apply to EPF deposits made between April 2021 and March 2022. 
• Despite the fact that interest is calculated on a monthly basis, it is only deposited to the Employees' Provident Fund account once a year, on March 31st of the applicable fiscal year. 
• The transferred interest is added to the following month's balance, i.e. April's balance, and then used to calculate interest once more. 
• If a contribution to an EPF account is not made for 36 months in a row, the account becomes dormant or inactive. 
• Employees who have not yet reached retirement age can earn interest on their inactive accounts. 
• Interest is not paid on money put in retired employees' inactive accounts. 
• Interest earned on inactive accounts is subject to taxation at the member's slab rate. 
• The employee will not receive any interest for payments made by the company to the Employees' Pension Scheme. After the age of 58, however, a pension is paid out of this amount. 

10 key points to remember while EPF withdrawal 

Here are the 10 key points that you bear in mind while withdrawing your EPF balance online or offline: 

1. EPF withdrawal is taxable if an employee doesn't render constant services for at least 5 years. 
2. If the tenure of constant service is below 5 years, the employer’s contribution to EPF along with the interest earned thereon is taxable under the head ‘salary’ within the member’s income tax return. 
3. There are 4 parts to any EPF contribution – employee contribution, employer contribution, the interest earned on the employer’s contributions and the interest earned on the employee contributions. 
4. If the quantity is quite Rs 50,000, and the period of service is below 5 years, the member can submit Form 15G/15H to prevent TDS in events where the income for that year is below the taxable limit. Form 15H is for senior citizens (60 years and above) and Form 15G is for people having no taxable income. 
5. If the entire service period is below 5 years, the combined EPF balance withdrawn becomes taxable within the fiscal year of withdrawal. 
6. The member’s own contribution isn't taxable but if the member had claimed a deduction under Section 80C on his contribution in earlier years, it becomes taxable under salary. Here, it is to be taken into notice that the EPFO member’s own contribution towards EPF is eligible for deduction under Section 80C of the tax Act. 
7. In the event of withdrawal prior to 5 years, the interest amount earned on the member’s contribution to EPF is liable for the tax under ‘income from other sources. 
8. In the case of the switching of jobs, if EPF is transferred to a different employer, the new employer’s period of employment is additionally included when computing the continual period. 
9. On withdrawal prior to 5 years of constant service, TDS are going to be levied at 10%. 
10. But during a few cases, i.e., in case the withdrawal quantity is below Rs. 50,000 or the employer is closing down the business, TDS isn't levied. 

The Bottom Line 

To conclude, every employee who is contributing towards the EPF should be aware of it. Aforementioned, terms are frequently used terms associated with EPF that not only employees but also employers should comprehend. 

Besides, the above-stated 10 points have to be taken into consideration by the employees at the time of withdrawal. Besides, if you are willing to avail of a Personal Loan on an urgent basis, Afinoz is the perfect marketplace that allows you to compare multiple Personal Loan offers at one place and apply for the best-suited one as per your needs and circumstances instantly via its app and website. 

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