The Employees Provident Fund or EPF is the most popular investment option for salaried individuals. It provides you safety and high returns compared to other fixed-income options such as PPF, FD, etc. What makes this more popular in India is the fact it enjoys the exempt-exempt-exempt (EEE) status, and as well known, the more popular the product is, the higher its queries will be. Such as, did you know ex-employees cannot contribute to their EPF account? An employee, if they want to, can voluntarily choose to pay a higher contribution than the required 12%? These two were some of the lesser-known provisions of EPF. However, we are accustomed to checking our UAN member portal for EPF balance and leaving the rest of the doubts for retirement. In this article, we have also collated the top five most frequently asked questions.
Q1. Is it mandatory to contribute to the EPF?
Any employee drawing a basic salary and dearness allowance of less than Rs. 15,000/month has to compulsorily contribute to the EPF. If the employee is earning more than this amount, they have the option to either opt to contribute to the EPF or not. The opting out of the EPF scheme should be done at the start of a career, & once opted in, contributions to the EPF are mandatory, a balance of which you can via EPF member login. Although many experts suggest employees contribute to the EPF because any salary that does not go into the EPF increases the in-hand amount but that further increases the amount of tax to be paid. Moreover, contributing to EPF also helps you to build a corpus to secure post-retirement income.
Q2. How much portion of the salary goes towards EPF?
As per the regulations, both employees and employers contribute 12% of the basic monthly salary to the EPF. Women can choose to contribute only 8% of the basic monthly salary for the first three years. For establishments having less than 20 employees, then both the employer and employee have to pay 10% of the salary. Here is an instance,
if your basic salary is Rs 30,000 a month, as an employee, you will need to contribute Rs 3,600, and your employer will contribute the same amount. The same can be checked by logging into the UAN member portal. However, one thing to note here is that the employer’s contribution will not entirely go towards the investment fund. Rather, it goes towards different schemes. Of the basic salary, about 3.67% will go towards EPF, and 8.33% will go towards EPS (Employee Pension Scheme). Hence, accordingly, Rs.1,250 will go towards Employee Pension Scheme. This rule applies if the employee is earning up to Rs. 15,000 basic salary. If the employee’s monthly salary is higher, the EPS amount will be calculated at Rs. 15,000. Make sure you check the EPF passbook from time to time to see the contributions made by your employer via EPF member login.
Q3. When is the TAX deductible on my EPF amount?
The USP of the EPF is that it has exempt-exempt-exempt or EEE tax status. This means, it is exempted from tax at the time of maturity, interest received on your EPF contributions are further exempted from tax as well. However, you should know the instances when EPF can become taxable. As per new law(effective from April 1, 2021, onwards), if an employee’s own contribution to the EPF or Employees Provident Fund account along with excess contribution via voluntary provident fund(VPF) exceeds 2.5 lakhs in a FY or financial year, then the interest earned on excess contribution will be taxable in India in the hands of an employee. For government sector employees where usually there is no employer contribution to the EPF account, then the interest will be tax-exempted for the employee’s own contribution up to Rs. 5 lakh in a financial year.
Q4. Lost my Job in COVID; how to make a partial withdrawal of my EPF amount?
The government back in 2020 had announced that an individual could withdraw a certain sum from their EPF if they are facing a financial crunch due to coronavirus induced lockdown in a pursuit to ease the financial burden of the salaried class. As per the rules, a member can withdraw an amount equal to 3 months of basic salary and dearness allowance or 75% of the credit balance in the account, whichever is lower for them. To apply for a withdrawal claim online, a member should have an activated UAN, Aadhar number should be verified and linked with UAN, and lastly, a bank account number should be seeded with UAN. After that, do log in to your UAN member portal, fill the Form 31 and select the reason ‘outbreak of covid pandemic’ as the reason for withdrawing. According to the rules, the money withdrawn from your EPF account during this time is not taxable.
Q5. Is it possible to withdraw the EPF amount for medical expenses without the need for a medical certificate?
As per the new rule, under the Medical Advance Claim, employees can withdraw up to ₹ 1 lakh advance for an emergency medical treatment or hospitalization owing to serious life-threatening illness, including COVID-19, without the need to submit any documents on the UAN member portal. Under the new rule of the provident fund, employees aren’t required to give any cost estimate of said hospitalization before withdrawing the funds.
However, the employees need to ensure they satisfy the conditions laid down by the authority for withdrawing money from PF such as the patient must be admitted to Government hospital/CGHS. In case they are admitted to the private hospital, permission for withdrawal will be made after a thorough investigation. Once it is done, visit the UAN member portal, fill up forms no. 31, 19, 10C, and 10D, proceed for the online claim, and enter the reason for withdrawing money. Fill up other necessary information and click submit. If an application via an EPF member login was made on a working day, the money would be transferred on the very next day either on your account or the hospital’s bank account.
Employees Provident Fund or EPF is one of the most preferred retirement savings products in India due to multiple reasons, with security and safety being the prime reasons. For any queries related to your EPF amount, employees are suggested to first check their passbook by checking into their UAN member portal and afterwards approach the authority. Overall, if managed well, such as by keeping a check on passbook balance through timely EPF member login, the EPF can go a long way in ensuring that you have a reasonably good retirement kitty.