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EPFO logo

Till Oct 2014 every employee had a Provident Fund (PF) account number which was associated with the employer. Change of job meant another ProvidentFund number. It involved transferring from one account number to another. Multiple account numbers have been a major area of concern as a majority of

grievances of employees are related to transfer of funds from one account number to another. To address this problem EPFO has launched a Universal

Account Number (UAN) driven Member Portal ,http://uanmembers.epfoservices.in, to provide a number of facilities to its members through a

single window. Member has to activate his registration to avail various facilities such as UAN card download, member passbook download, updation of KYC

information, listing all his member ids to UAN, file and view transfer claim. Our article UAN or Universal Account Number and Registration of UAN and FAQ

on UAN number and Change of Job explain it in detail

EPF, EPS, EDLIS

The Constitution of India under “ Directive Principles of St ate P olicy” provides that the State shall within the limits of its economic capacity make effective

provision for securing the right to work, to education and to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved wan

The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 4th March,1952. A series of legislative interventions were made in

this direction, including the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Presently, the following three schemes are in operation under

the Acts:( Click on the link if interested in reading the acts which are in pdf format)

1. Employees’ Provident Fund Scheme, (EPS)1952

2. Employees’ Deposit Linked Insurance Scheme,(EDILS) 1976

3. Employees’ Pension Scheme, 1995 (replacing the Employees’ Family Pension Scheme, 1971) (EPS)

Employees’ Pension Scheme (EPS) of 1995 offers pension on disablement, widow pension, and pension for nominees. EPS program replaced the

Family Pension Scheme (FPS). It is financed by diverting 8.33 percent of employer’s monthly contribution from the EPF(restricted to 8.33% of 6500 or Rs

541. From Sep 1 2014 salary limit has been increased to Rs 15,000 so Rs 1250 per month) and government’s contribution of 1.17 percent of the

worker’s monthly wages.

The purpose of the scheme is to provide for

1) Superannuation Pension:Member who has rendered eligible service of 20 years and retires on attaining the age of 58 years.

2) Retiring Pension :member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58

years.

3) Permanent Tot al Disablement Pension

4) Short service Pension: Member has to render eligible service of 10 years and more but less than 20 years.

Employees Deposit Linked Insurance Scheme (EDLIS)

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Under the EDLI scheme life insurance cover is provided to the PF members. The cost of the scheme is borne by the employer but as the amount of life coverag

under this statutory scheme is very low (a maximum amount of Rs. 60,000), usually employers opt out of the EDLI scheme by going for group insurance schem

which usually provides higher coverage to employees without any increase in cost to the employer.

EPF, EPS and EDLIS are calculated on Basic salary,Dearness allowances(DA), cash value of food concession and retaining allowances if any.Most of the

organizations follow Basic+ DA Method.

Retaini ng al lowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the

establishment is not working, for retaining his services.

Table below gives the rates of contribution of EPF, EPS, EDLI, Admin charges in India.

Scheme Name Employee contribution Employer contribution

Employee provident fund 12% 3.67%

Employees’ Pension scheme 0 8.33%

Employees Deposit linked insurance 0

0.5%(capped at a

maximum of Rs

15,000)

EPF Administrative charges 0 0.85% (From Jan

2015) 1.1% (Earlier)

PF Admin account 1.1%

EDLIS Administrative charges 0 0.01%

In industries like beedi, jute, guar gum factories, coir industry (other than spinning sector) the Employee contribution is 10% while employer’s contribution is1.67%.

Employees drawing basic salary upto Rs 15000(From Sep 1 2014 salary limit has been increas ed to Rs 15,000 before it was Rs 6500) have to

compulsory contribute to the Provident fund and employees drawing above Rs 6501/- have an option to become member of the Provident Fund. It is beneficia

for employees who draw salary above Rs 15001(Before Sep 1 2014 minimum was Rs 6501) to become member of Provident Fund as it is deducted from the

salary before it is deposited on bank or given hence compulsorily saving happens. Employee’s contribution is matched by Employer’s contribution(till

12%) so extra money and it is helpful for tax purpose too. The employer contribution is exempt from tax and employee’s contribution is taxable but

eligible for deduction under section 80C of Income tax Act.

Those who started job after 1 Sep 2014 and earning more than 15,000 Rs in basic and DA will not be contributing to the EPS or Pension sche me

From 10 Feb 2016 one is not allowed to withdraw Employer share of EPF contribution and retirement age has been change to 58 years . Our

article Changes in EPF Withdrawal Rules from 10 Feb 2016 discusses it in detail.

Q.Which form has to be filled while becoming member of provident fund?

To become a member of the Employee Provident Fund one has to fill Form 11 and Nomination Form. For more details check out EPFI webpage for

Employees. Sample images of the Form 11 and Form 2(front and back) are given below. Click on the image to enlarge.

Form 11 Form 2 Front Form 2 back

Calculation of Employees Provident Fund Contributions

Basic salary of Rs 3500

Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.

Contribution Towards Calculation Amount

EPF Employees share 3500 x 12% 420

EPS Employer share 3500 x 8.33% 292

EPF employer share 3500 x 3.67% 128

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EDLI charges 3500 x 0.5% 18

EPF Admin charges 3500 x 1.1% 39

EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)

Basic salary above Rs 15,000 (Before Sep 1 2014 limit was Rs 6500)

In such cases companies uses different method for calculation as per their pay roll policy. Consider an employee getting a basic salary of 20000. We can

calculate it in different ways but EPS is calculated only up to 15000( was Rs 6500 before 1 Sep 2014) that means the maximum amount is fixed to Rs 1250(

Before Sep 1 2014 it was 541.00). The three methods mentioned below are based on the above example.

Method-1

If company consider total basic salary above the limit fixed 15,000(6500.00 before 1 Sep 2014) for PF calculation. Employer has decided to contribute on tota

basic salary which is 12 % on 20,000.00 equal to 2400.00. EPS Share is fixed to 1250. Balance (2400- 1250) goes to EPF account 1150.00. You may be

thinking that, what about 3.67%?,

Contribution Towards Calculation Amount

EPF Employees share 20000 x 12% 2400

EPS Employer share 15000 x 8.33% 1250

EPF employer share 20000 x 12% (-) 1250 1150

EDLI charges 20000 x 0.5% 220

EPF Admin charges 20000 x 1.1% 220

EDLI Admin charges 20000 x 0.01% 2

Method -2

Some companies follows the below method in which employee share is calculated on 20000 and employer share is calculated on up limit Rs 15000

Contribution Towards Calculation Amount

EPF Employees share 20000 x 12% 2400

EPS Employer share 15000 x 8.33% 1250

EPF employer share 15000 x 3.67% 550.50

EDLI charges 15000 x 0.5% 75

EPF Admin charges 15000 x 1.1% 165

EDLI Admin charges 15000 x 0.01% 1.5

Method-3

Some companies calculate both employer and employee shares on 15000 (Rs 6500 before Sep 2014) in spite of higher basic salary than 15000(Rs 6500

before Sep 2014)

Contribution Towards Calculation Amount

EPF Employees share 15000 x 12% 1880

EPS Employer share 15000 x 8.33% 1249.5(rounded to 1250)

EPF employer share 15000 x 3.67% 555.5 (rounded to 555)

EDLI charges 15000 x 0.5% 75

EPF Admin charges 15000 x 1.1% 165

EDLI Admin charges 15000 x 0.01% 1.5

Ref:caclubindia.com

Q. What is the interest on the PF accumulations ?

A : Compound interest as declared by Central Govt. is paid on the amount standing to the credit of an employee as on 1st April every year.

Q. How does EPF total amount, interes t calculated?

At the beginning of each year there would be opening balance, the amount accumulated till then. Contribution is made monthly but interest is calculated

yearly. One gets interest on opening balance and monthly contribution. So for next year the new opening balance would be: old opening balance +

contribution throughout the year + interest on the (old opening balance + contribution)

To see the calculation for each year in above example click on the image below. You can also play with EPF calculator here.

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EPF calculation

Q. What is the EPF Interest Rate?

The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees. In the past several decades, the interest

rate has ranged from 8-12 % of the balances maintained in the fund. The EPF interest rate notification is available on the official website of EPF India on an

annual basis. The same is communicated through major dailies in all cities. To see Interest rate over the years from 1952 please click the image to enlarge.

EPF interest years since

1952-53

Q. How much would one save by investing in EPF?

Let’s say Swayam starts with a basic salary of Rs. 20,000. Every year, on an average, he gets a 5% increment. He started at 25 years and worked till 60 years

so his working life is, 35 years. He contributes 12% of his basic salary towards PF which is matched equally by one’s company, (EPF contribution is 3.67%,

EPS 8.67%).

In this case, over the course of 35 years of his working life, his total contribution is Rs. 26.01 Lakhs. Of course, his company makes a contribution of Rs.

7.955 Lakhs, total contribution of Rs 33.967 lakh. And this amount grows into – Rs. 1.38 Crores at the time of his retirement!

EPF Benefit

(Image courtesy Livemint)

Q. Can I voluntary contribute more than the statutory limit to EPF?

You can contribute additional amount (over and above 12%) to Provident Fund by depositing VPF ( Voluntary Provident Fund). However, employer is not

bound to do a matching contribution.The employer is liable to pay contribution only on 6500/15000 whatever is the basic salary. This is called voluntary

contribution and a Joint Declaration Form needs to be filled up where the employer and the employee both have to give a declaration as to the rate at which PF

would be deducted. Our article Voluntary Provident Fund explains it in detail.

How to check EPF balance?

EPFO has been using technology to turn into a more professional and nimble organisation. Now you can check your EPF balance through SMS, see your

passbook. It has introduced online facility for transferring the balance to a new account. Going forward, all members will have a Universal Account

Number(UAN) which will be portable across employers and cities. UANs have already been allotted to active contributors to the EPF

You can check your EPF balance through various ways. Our article How to get information about EPF balance : Annual Statement, SMS, E-Passbook explain

the various methods of getting EPF balance in detail.

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Annual Statement : EPFO used to send an annual statement through the employer to the employee which gives details about the PF accumulations. It is

wide slip of paper. The statement contains details like, Opening balance, amount contributed during the year, withdrawal during the year, interest earned

and the closing balance in the PF account.

EPF balance by SMS : From July 2011 one can check the EPF Account balance online.

Go to http://epfindia.com/site_en/KYEPFB.php www.epfindia.com/MembBal.html. Select EPFO Office

Enter PF Account Number which is in the format : EPFO Office Code/Establishment Code(Max. 7 Digits)/Extension(Max. 3

digits)/Account Number (Max 7 digit) (PF Account Number may not have Extension code, in that case leave it blank).

Enter your Mobile and Name, Accept Terms and condition and Submit.

You will get SMS alert from EPFO : EE amount : Rs XXXXX and ER amount Rs:XXXXX as on <Today’s Date>(Account updated upto Date).

Sequence of steps is shown in the images below. Click on image to enlarge.

Know your

balance

Instructions

Select PF office EPF Select PF

Office Code

EPF Enter

account Number

You will get SMS alert from EPFO : EE amount : Rs XXXXX and ER amount Rs:XXXXX as on <Today’s Date>(Account updated upto Date).

EE = Employee Contribution and ER = Employer Contribution on date(shown in Account updated date) mentioned in your SMS. It does noshow current balance of PF Account as on Today

EPF Passbook : On 30 Nov 2012 EPFO launched e-passbook facility. The online EPF or EPF ePassbook is an online version of the employee’s

provident fund account. You need to register at members.epfoservices.in to get the passbook. Note it takes time for registration to become active. You

will get an SMS when you would be able to download the passbook. It shows information in detail, opening balance, contribution every month from

employee and employer, how employer contribution is being split into PF and EPS. Withdrawals if any that has been made from the EPF account.

EPF passbook with UAN

The UAN is a 12- digit number allotted to each Employee Provident Fund member by the Employee Provident Fund Organization(EPFO) which gives

him control of his EPF account and minimises the role of employer. UAN number activation started in Oct 2014. You can download the EPF passbook i

you have activated your UAN number. Our article UAN or Universal Account Number and Registration of UAN talks about how to register for UAN.

EPF and Mobile You can also view it through the Mobile App launched by EPFO in Sep 2015, as explained in our article EPFO Mobile App , SMS

Service and Missed Call : Employee Provident Fund

Withdrawal and Transfer of EPF

Q. At the time of change of Job what happens to EPF? Can one withdraw the entire amount?

A: Yes, legally it is mandatory to transfer EPF Account at the time of job change. But, people generally don’t do it; instead of transferring, they withdraw the

amount. From 10 Feb 2016 You cannot withdraw Employer contribution to EPF before 58 years. Our article Changes in EPF Withdrawal Rules from 10

Feb 2016 discusses it in detail.

In case of EPS, if the service period is less than 10 years, you’ve option to either withdraw your corpus or get it transferred by obtaining a ‘Scheme

Certificate’. Once, the service period crosses 10 years, the withdrawal option ceases.

Q Are there in any tax implications, if I withdraw the EPF balance before 5 years?

A: In case you are a member of recognized provident fund it depends on if contribution is over 5 years or not, including transfers from different companies. If you withdraw before completing a period of 5 years, then all your previous years income gets recomputed as if the fund was unrecognized from the very

beginning (i.e., the tax benefits you received on your own contribution u/s 80C/88 in earlier years will get forfeited) and further the employer contribution and

interest received will be added to your current income subject to relief under section 89.

Q. What is TDS on EPF withdrawal? What is Form 15G?

Provident fund withdrawal is before five years of completion of service attracts tax deducted at source (TDS) at 10 per cent from Jun 1 2015.

TDS will be deducted at 34 per cent if one does not submit PAN.

Exemption from TDS has been given to subscribers with no taxable income, provided they submit 15G/15H form . To avoid the levy of TDS,

15H (for senior citizens) or Form No. 15G (other than senior citizens) can be submitted, provided the provident fund amount payable is up to basic

exemption limit which for AY 2016-17 is 2,50,000 and Rs 3,00,000 for senior citizens respectively.

Our article How to Fill Form 15G? How to Fill Form 15H? explains how to fill the form 15G/15H in detail.

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Q Are there in any tax implications, if I withdraw the EPF balance after 5 years?

No if you withdraw after 5 years of total contribution to EPF(which includes multiple jobs) then your EPF withdrawal becomes tax free. Show it as exempt

income in Income tax return.

Q. Can I withdraw from EPF while working?

EPF scheme allows partial withdrawals for the purpose of marriage/illness/higher education/house construction etc.

Q How to transfer EPF?

Ideally, you should initiate the process of transferring your EPF balance as soon as you join your new organization and are allotted a new PF accountnumber. From Oct 2014 most of employees have been alloted Universal account number or UAN , a 12-digit number by the Employee Provident Fund

Organization(EPFO) which gives him control of his EPF account and minimises the role of employer. Universal Account Number (UAN) Member

Portal (www.uanmembers.epfoservices.in) was launched in September 2014. This portal offers lot of facilities to employees or EPF members. But, EPF Online

Transfer Claim is still not available. For time-being you have to submit online EPF Transfer claims through http://epfindia.com/Employee_OTCP.htmlor Click

on Online Transfer Claim link ar EPF website http://memberclaims.epfoservices.in/ .

Employee Pension Scheme

Q: When can an employee start receiving a Pension?

A: A employee can start receiving the pension under EPS only after rendering a minimum service of 10 years and attaining the age of 58/50 years.However, no

pension is payable before the age of 50 years and early pension after 50 years but before the age of 58 years is subject to discounting factor @ 4% (w.e.f.

26.09.2008) for every year falling short of 58 years. In case of death / disablement, the above restrictions doesn’t apply.

Q: How long the pension is available?

A: Lifelong pension is available to the member and upon his death members of the family are entitled for the pension.

Q: What is the formula for calculating the monthly pension?

A:Under Employees’ Pension Scheme, the monthly retiring pension is decided on the basis of ‘Pensionable Service’ and ‘Pensionable Salary’ and is worked ou

as follows

Monthly pension=( Pensionable salary*Pensionable service)/70

Pensionable Salary is arrived at by considering the average contributing salary immediately preceding 12 months from the date of exit from the scheme, normally

this would be limited to Rs 6,500 p.m. unless certain enhanced contributions are made by the employer with permission. Pensionable Service is the service in

years rendered by the member for which contributions have been received maximum cannot exceed 35 years

Q: What is the maximum amount of Pension available under EPS?

A: The government has also fixed monthly pension benefit at Rs 1,000 from the financial year 2014-15 . Those who started job after 1 Sep 2014 and earningmore than 15,000 Rs in basic and DA will not be contributing to the Pension scheme. Before Sep 1 2014 it was Based on a maximum employment period of

35 years, and maximum contribution of Rs 6500, the maximum amount of pension as per the Pension formula would be = 6500 * 35)/70 = Rs 3,250 per month

or Rs. 39,000(3250 * 12) per year.

Q. Is the Monthly Pension paid under EPS just?

The amount of pension is meager. If one would have invested Rs 541 in a recurring deposit at the rate of 8% for 35 years one would get 12,49,263 as maturity

amount. If this maturity amount is put in buying the Pension plan say LIC’s Jeevan Akshay VI and put the above amount Rs 12,49,263 in the premium calculato

of LIC with option as Annuity payable for life, one would get montly pension of Rs 10,150 which is much more than Rs 3250.

Related Articles:

What are EPF,Pension and Insurance Changes from1 Sep 2014

Basics of Employee Provident Fund: EPF, EPS, EDLISUnderstanding Employee Pension Scheme or EPS

Voluntary Provident Fund, Difference between EPF and PPF

Tax on EPF withdrawal

Transfer EPF account online : OTCP November 10, 2013

Articles related to Salaried on EPF, Variable Pay, ESOP,NPS, Income Tax, MBA, Changing jobs

In this article we covered about EPF, EPS, the calculation etc. In the next article we shall cover about how to withdraw or transfer from EPF, EPS. Difference

between EPF and PPF? If you find something missing or incorrect please let us know, we shall correct is As Soon As Possible(ASAP). Hope you found this

article helpful. What are you thoughts on EPF? Does it make sense to contribute to EPF?

basics, EPF, Salary

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