Employee Provident Fund (EPF) is one of the main platforms of savings in India for nearly all people

working in Private sector Organizations. This article is about what is Employee Provident
Fund(EPF),Employee Pension Scheme(EPS), Employees Deposit Linked Insurance Scheme
(EDLIS), how the contributions are calculated based on basic salary and dearness allowance, what
are the EPF interest rate, how much would one save in EPF, how would one know about the
amount accumulated in PF.

Overview of Employee Provident Fund

What is Employee Provident Fund?
A provident fund is created with a purpose of providing financial security and stability to elderly
people. Generally one contributes in these funds when one starts as employee, the contributions are
made on a regular basis (monthly in most cases). Its purpose is to help employees save a fraction of
their salary every month, to be used in an event that the employee is temporarily or no longer fit to
work or at retirement. The investments made by a number of people / employees are pooled together
and invested by a trust. Typically 12% of the Basic, DA, and cash value of food allowances has
to be contributed to the EPF account. When one says EPF it means
Employee Provident Fund(EPF) : Employees contribution is matched by Employers
contribution(till 12%). The employer contribution is exempt from tax and employees
contribution is taxable but eligible for deduction under section 80C of Income tax Act. The
EPF amount earns interest as declared by Government.
Employees Pension Scheme (EPS) of 1995 offers pension on disablement, widow
pension, and pension for nominees.
Employees Deposit Linked Insurance Scheme (EDLIS) provides for a lump sum
payment to the insureds nominated beneficiary in the event of death due to natural causes,
illness or accident, while in job.
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)
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%
Difference between EPF and EPF Private Trust?
For an employer there are three ways he can contribute to Provident Fund of his Employees if number
of employees is more than 20. Exempt means free from an obligation, duty, or liability to which others
are subject.
One is to save in an un-exempt fund like the EPF under the EPFO. Un-exempted firms
are those firms which maintain the PF accounts of their workers with EPFO. There are over five
crore active subscribers whose accounts are being managed by EPFO.
 Save in a company-run exempt fund, EPF Private Trust, recognised by the
EPFO and which pays at least the same interest as the EPF. EPF Trust has to do the duties and
responsibilities like EPFO. EPF Private trusts are formed by firms that manage the money and
accounts of their workers themselves and have exemption from filing PF returns. The members of
these trusts enjoy income tax and other benefits at par with EPFO
subscribers. Such establishments who seeks exemptions and create EPF Private Trusts are called
exempted establishment. However, the pension is payable only by the EPFO. Companies like
TCS, Accenture have their Private PF Trust. Our article EPF Private Trust, the Exempted
EPF Fund discusses it in detail.
Put money in a company-run excluded fund, which is not EPFO regulated, but is set up
with approval from the resident income tax commissioner. This type of fund looks after all
investments and fund management itself and is self-regulated.
How does one join EPF under EPFO?
Employees working in private sector, drawing basic salary upto Rs 15000(From Sep 1 2014 salary
limit has been increased 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 beneficial 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.
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 scheme.
From 10 Feb 2016 one is not allowed to withdraw Employer share of EPF contribution
andretirement age has been change to 58 years. Our article Changes in EPF Withdrawal Rules
from 10 Feb 2016 discusses it in detail.
Every employee needs to submit a declaration,Form 11, when he takes up new employment in
an organisation which is registered under the EPF Scheme of 1952. This form, EPF Form 11,
contains basic information regarding the employee and it is mandatory for an employee to fill it upon
joining an organisation . EPF Form 11 is a self declaration by new joinee about his status whether he
is a member or non member of EPF / EPS in earlier employments and opt out of EPF. This
article EPF Form 11 on Joining a New Job explains what is EPF Form 11, goes through contents of
EPF Form 11 and instructions on how to fill it.
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

Government Employees do not contribute to EPF but to NPS from

2004
Government employees, do not contribute to EPF. Contribution to Tier-I is mandatory for all
Government servants joining Government service on or after 1-1-2004 (except the armed forces in the
first stage), whereas Tier-II will be optional and at the discretion of Government servants. In Tier-I, a
Government servant will have to make a contribution of 10% of his basic pay plus DA, which will be
deducted from his salary bill every month by the PAO concerned. The Government will make an equal
matching contribution. However, there will be no contribution from the Government in respect of
individuals who are not Government employees.
 How is UAN related to EPF?
UAN is Universal Account Number. The UAN is a 12-digit number allotted to employee who is
contributing to EPF. Universal number is a big step towards shifting the EPF services to online
platform and making it more user-friendly. Please note that The universal account number remains
same through the lifetime of an employee. It does not change with the change in jobs. Now
one has UAN number and PF number also called as Member Id.
An employee will have one UAN or Universal Account number, which as the name implies will remain
the same. It will maintain all your Member Ids. Its like you can have multiple Saving Bank account
but all these are tied to your one Permanent Account Number or PAN. So when you change your
job and the new employer, if contributing to EPF, gives you a new Member ID. This new Member ID
has to be linked to your UAN number.
Through Universal Account Number (UAN) driven Member
Portal ,http://uanmembers.epfoservices.in, EPFO provides 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. Following articles explain UAN in detail.
UAN or Universal Account Number and Registration of UAN
FAQ on UAN number and Change of Job
UAN Problems, Password,Mobile Number,Incorrect Details and Help Desk
Who runs EPF?
Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation
(EPFO) of India. An establishment with 20 or more workers working in any one of the 180+ industries
( given here) should register with EPFO. EPFO is a statutory body of the Indian Government under
Labour and Employment Ministry. It is one of the largest social security organisations in the world in
terms of members and volume of financial transactions undertaken.

EPFO logo

Interest on EPF
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.

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

How EPFO manages to pay the interest?

The EPFO declares the annual interest paid out to subscribers each year. In the last four years, the
returns have been around 8.75 per cent a year. This interest is decided based on the surplus of its
income over expenses. The fund earns income from the interest on government deposits, gilts,
corporate bonds and the other securities it holds in its portfolio. It incurs costs on subscriber payouts
and expenses. n 2015-16, EPFO invested 5% of its incremental corpus, or a little more than Rs.6,000
crore, in stocks. Labour ministry officials estimate that in 2016-17, the amount would rise to as much
as Rs.10,000 crore. Our article How EPFO Manages Money, EPFO invesment in Stock
Market discusses it in detail.
Q. How does EPF total amount, interest 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.

EPF calculation

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

Lets 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 ones 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 explains the various methods of getting EPF balance
in detail.
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 <Todays 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 <Todays 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 not show 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 employees 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 if 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 dont 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, youve 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.
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 account number. 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.html or Click on Online
Transfer Claim link ar EPF website http://memberclaims.epfoservices.in/ .

Employee Pension Scheme

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 employers 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 governments contribution of 1.17 percent of the workers monthly wages. Our
article Understanding Employee Pension Scheme or EPS discusses it in detail.
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 Total Disablement Pension
4) Short service Pension: Member has to render eligible service of 10 years and more but less than
20 years.
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 doesnt 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 out 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 earning more 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. Our article How much EPS Pension will you get with EPS Pension
Calculator explains it in detail.
Maximum Pension one can get is Rs 7,500 per month.
Minimum Pension one can get is Rs 1,000 per month.
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 LICs Jeevan Akshay VI and put the above amount Rs 12,49,263 in
the premium calculator 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.
Employees Deposit Linked Insurance Scheme (EDLIS)
 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 coverage under this statutory scheme is very low,
usually employers opt out of the EDLI scheme by going for group insurance scheme which usually
provides higher coverage to employees without any increase in cost to the employer. Premium for the
EDLI is entirely funded by the employer, which contributes 0.5% of monthly basic pay (capped at a
maximum of Rs 15,000) as premium for life cover in case the organization does not have a group
insurance scheme for its employees.

In Sep 2015, the EPFO announced increase in the maximum amount assured under its
Employees Deposit Linked Insurance Scheme (EDLI) to Rs 6 lakh from the existing Rs 3.6
lakh. The claim amount of the EDLI is decided by the last drawn salary of the employee. The claim
amount would be
30 times the salary.For this calculation salary is basic pay plus DA or Dearness
Allowance. The upper limit of wage for the EDLI is Rs 15,000.
Along with this, the bonus of Rs 1.5 lakh is also given.
Thus, the maximum EDLI claim amount would be Rs 6 lakh [(30 x15,000) + 1,50,000].
The condition of continuous employment of one year under current employer before being
eligible for insurance benefits was also removed.