EPF Rules Not Known to Many

When we talk about Employee Provident Fund (EPF), we mean to say an equal contribution of 12% of basic salary by employee and employer. However, there are many rules related to EPF which are not known to people. This article will discuss such unpopular information:

1)      EPF provides for nomination facility

If you have not opted for a nominee, then in the event of your death, your legal heirs will have to face difficulties in claiming your amount. A nominee can be updated with EPF office by filling and submitting form 2.

2)     Eligibility criteria for getting pension under EPF

EPF is composed of two elements viz. EPF and EPS. Former is for your provident fund and the latter is used for pension. Out of 12% contribution from your employer, 8.33% or Rs. 541, whichever is higher belongs to EPS and the balance is added to your pension fund. EPS portion of your fund does not earn any interest. One can get maximum Rs. 3,250 per month for their entire life as pension from EPS. After the death of the account holder, his family members will be eligible for the pension. By rule a person (EPF account holder) is eligible for pension if he is of 58 years of age and must have worked for at least 10 years in job with continuity of EPF. That is, even In case of job change, EPF has been transferred and not withdrawn.

3)     There is no guarantee for withdrawing 100% money

As has already been said that EPF has two elements – EPF and EPS, 100% withdrawal can be made from EPF. However, there is a different rule related to EPS. The amount of withdrawal possible from EPS is calculated on the basis of Table D. Moreover, it must always be remembered that the withdrawal is possible only within 10 years from the beginning of your EPF account. After that it will become a pension fund.

Values for Table D

Please note that the maximum wages allowed for calculating withdrawal is Rs. 6,500.

For example – Suppose your last salary drawn was Rs. 50,000. After working for 8 years, you want to quit your job and intend to withdraw your provident fund. In this case, you can withdraw Rs. 56,550 (6,500 * 8.70) from EPS. Even though you must be having Rs. 80,000 in EPS, but you will not be able to withdraw 100% amount from it.

4)      Possibility of contributing more than 12%

There is a facility known as VPF, whereby you can contribute more than 12% of your basic salary. But that does not mean that your employer’s contribution will also be increased. He will continue to contribute at 12% only.

5)      EPF cannot be withdrawn on job change

By rule, an EPF allows for withdrawal for the entire amount after two months of quitting a job but in case of job change EPF account holder is liable for getting it transferred. Though it is a separate issue that people withdraw their amount even in case of job change, which in practice is against law.

6)      Contribution to EPF is not compulsory

If your basic salary is more than Rs. 6,500 and you have never been a part of EPF, then you can ask your employer not to deduct anything from your salary towards PF. However, if your salary is less than the specified amount or else your EPF number exists then the option of contribution ceases by default and it becomes compulsory to contribute.

7)      There is an inbuilt option of life insurance in EPF

A company which is not providing life insurance benefits to its employees is bound to contribute 0.5% of employee’s monthly basic salary (maximum up to Rs. 6,500) as life insurance premium under Employees’ Deposit Linked Insurance Scheme. However, maximum cover in this case amounts to Rs. 60,000 only.

8)      EPF can be withdrawn during continuity of job 

Though it is not possible to withdraw anything from EPF till the continuation of your job, but there are certain circumstances in which you can get exemption and can withdraw while remaining in job. These circumstances are education or marriage of self/ children/ siblings, medical treatment of self/ dependent family members, repayment of a home loan, construction/ acquisition/ repair of house. You can withdraw in above mentioned circumstances but after meeting certain terms and conditions defined for each circumstance.

9)      Handling issues

In case of any issue related to your EPF, you can file an application with RTI for quick action.

10) Universal Account Number

Update as on Oct 2014 : Now you may link all your EPF accounts i.e of current employer and previous employers using Universal Account Number (UAN). However you need to activate the same online and then link the same to your previous accounts. EPFO also provides the facility to check the status online. Also you may check your epf balance online through your EPF passbook.