Employee Provident Fund: What Is The Eligibility?
8 February, 2023
Being employed by an organisation comes with numerous perks. One such perk is the EPF. Short for Employee Provident Fund, it is a scheme rolled out by the Employee Provident Fund Organisation (EPFO). Various organisations are required to abide by the EPFO regulations. You and your employer contribute a fixed percentage of your basic salary towards an interest-generating plan. You can get information on eligibility for EPF for employees below.
What is EPF?
EPF, or Employee Provident Fund, is an interest-generating fund under EPFO. Registered organisations that have 20 or more employees are required to offer Provident Fund (PF) to their employees. You and your employer each must contribute a pre-determined percentage of your basic salary to EPF. The employer’s contribution is further divided into EPF and Employee Pension Scheme (EPS).
Typically, organisation with 20 or more employees need to register with EPFO and offer 12% EPF contribution. Out of 12%, the employer contributes 3.67% to the EPF, while the remaining 8.33% goes to the Employees’ Pension Scheme. For organisations with employees less than 20, a 10% contribution rate is applicable. The contributions are parked in the provident fund, where they earn interest until you redeem the fund.
Eligibility for EPF for employees
You are eligible for EPF if you fulfil the following criteria:
You work at an organisation that has 20 or more employees. The company must be registered with the EPFO. An organisation with less than 20 employees is not required to register for EPF. However, they can do so voluntarily.
You receive a monthly salary of ₹15,000, inclusive of the basic wages and dearness allowance. It is mandatory for all employees with the aforementioned salary to have an EPF account. If your salary increases, you can voluntarily opt for EPF, provided your employer and an Assistant PF commissioner consents to it.
EPF eligibility for employers
Your employer is required to register for EPFO for employees of 20 or more. However, they can opt out of the mandatory contribution if they have less than 20 people in the organisation. The organisation can also request for exemption if the majority of the employees vote for employee PF exemption.
How does EPF work?
Let us understand how EPF eligibility works:
Let us assume you work at an organisation that is registered with EPF. Your employee registers you for EPF, and you have to mandatorily invest 12% or 10% of your basic salary in the EPF scheme every month.
Additionally, your employer invests another 12% amount equivalent to your basic monthly salary in your EPF. Out of which, the employer contributes 8.33% to the Employee Pension Scheme. This allows you to build a corpus for your retirement. The remaining 3.67% gets invested in the PF. Essentially, you are contributing a total of 24% to EPF.
Moreover, you get access to Employee Deposit Linked Insurance (EDLI) Scheme. EDLI offers a life insurance cover. Here, even if you earn a higher salary, the contribution is based on the maximum salary limit of ₹15,000.
If your organisation has less than 20 employees, you only need to contribute 10% of your basic salary to EPF. Other criteria for reduced contribution include:
Any sick industrial company declared as such by the Board of Industrial and Financial Reconstruction
Any company that has accumulated losses equivalent to or exceeding its entire net worth
Any jute, beedi, brick, coir and guar gum industries
How to get started with EPF?
Applications for EPF are made through respective employers. All you need to do is submit the EPF form 11 provided by your employer. You also need to submit nomination forms for the Employee Provident Fund and the Employee Pension Fund.
You will receive a Universal Account Number (UAN). When you switch jobs, your UAN remains constant, while the member ID changes. You need to mention your UAN when you are employed with different organisations, as you can only have one EPF account in your lifetime.
How does EPF benefit employees?
With an EPF account, you can avail of the following benefits:
Building a corpus for retirement
Out of your employer’s 12% contribution, your employer directs 8.33% to the Employee Pension Scheme. You also earn attractive interest rates of 8.50%, which means your capital appreciates with time. Since the income flow is limited once you retire, the accumulated funds in your EPF account can come to your aid. You can use the PF money to pay for utilities, medical care, vacations and much more.Medical emergency fund
Typically, you can withdraw your EPF money under various clauses. Per section 68-J of the Employee Provident Funds Scheme, 1952, you can withdraw money from your EPF account to fund hospitalisation expenses lasting for a month or more and major surgical operations at a hospital. You can extend the funds to finance these medical expenses of your family members as well. Moreover, you can utilise the funds for treating tuberculosis, leprosy, paralysis, cancer, heart conditions, etc.Hassle-free premature withdrawals
The Employee Provident Fund Scheme, 1952, has laid out several clauses under which you can withdraw funds from your EPF account before maturity. This allows you to finance several planned or unplanned expenses, including house purchases, repayment of loans in special cases, marriage, higher education, unemployment, non-payment of salary, and medical circumstances.Tax benefits
Investing in EPF allows you to save tax. Under Section 80C of the Income Tax Act, 1961, contributions made towards employee PF in India are exempt from tax. You can avail of tax exemption of up to ₹1.5 Lakh in a financial year.
What is the eligibility to withdraw EPF?
Under the Employee Pension Fund scheme, the following are the PF rules when it comes to withdrawal eligibility:
Para 68B: For purchasing a house or constructing a house, you can withdraw funds from your EPF, provided you have been holding the account for at least five years.
Para 68BB: You can repay your home loan with your PF money if you have been holding an EPF account for at least 10 years.
Para 68H: If your organisation gets locked out for more than 15 days, wherein you are rendered unemployed without pay, EPFO lets you withdraw your PF share. Also, if you continuously do not receive your monthly pay for two months, you can withdraw your share from the EPF account.
Para 68J: In case you need money for medical emergencies for you or your family, you can withdraw your share with interest or amounts equivalent to six months’ basic salary and dearness allowance, whichever is lower.
Para 68K: You can finance marriage or post-matriculation expenses for yourself, your children and your siblings by withdrawing 50% of your share with interest. You must be registered with EPF for at least seven years.
Para 68N: For physical disability, you can purchase medical equipment with your employee share and the interest earned or six month’s basic salary and dearness allowance, whichever is lower.
Para 69: You can withdraw the entire EPF amount upon retirement from your service after 55 years of age.
Earn high returns with HDFC Bank’ Fixed Deposits (FD)
EPFs are lucrative investment vehicles that require you to be associated with an organisation registered with EPFO for employees. However, to make investments on your own terms, you can consider a Fixed Deposit. With FDs, you can invest your preferred amount for a flexible tenure. Plus, you need not wait until retirement to withdraw your FD funds.
You can transfer money between your Savings Account or Current Account and your FDs with HDFC Banks’ Sweep-in/Sweep-out feature. Ensure your savings are secure with HDFC Bank’s various Fixed Deposit offerings. Click here to get started.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
