A Secure Guide To Epf India Investments

The Employees' Provident Fund (EPF) is a savings scheme introduced by the Employees' Provident Fund Organisation (EPFO) under the supervision of the Government of India. It is a government-established savings scheme for employees of the organised sector. The EPF interest rate is declared each year by the EPFO, a statutory body under the Employees' Provident Fund Act, 1956. For the 2023-24 financial year, the interest rate was set at 8.25%. To invest in the EPF, an individual must be an employee of a company registered under the EPF Act. Both the employer and employee are required to contribute 12% of the employee's basic salary and dearness allowance to the EPF account each month.

Eligibility criteria for EPF India

The Employees' Provident Fund (EPF) is a welfare scheme that offers social security and retirement benefits to salaried employees in India. Here are the eligibility criteria for EPF:

Eligibility criteria for employees:

• Any salaried employee who is a resident of India is eligible for EPF.
• Employees earning a salary of up to Rs. 15,000 are mandatorily required to contribute to EPF.
• Employees earning a salary of more than Rs. 15,000 can also choose to voluntarily contribute to EPF, subject to approval from the Assistant PF Commissioner.
• There is no age restriction for employees to become members of EPF. However, employees who are 58 years or older are not eligible to become members of the Pension Fund.

Eligibility criteria for employers:

• Organisations with more than 20 employees must register for the EPF scheme.
• Organisations with less than 20 employees may voluntarily register for the EPF scheme.
• Employers with less than 20 employees or with the consent of their employees can be exempt from EPF registration, subject to certain conditions and formalities.

Other criteria:

• Employees are required to contribute a minimum of 12% of their basic salary and dearness allowance to EPF.
• Employers are required to contribute 12% of the employee's basic salary, dearness allowance, and retaining allowance to EPF.
• Employees can make partial withdrawals from their EPF account after completing seven years of deposit for specific purposes, such as marriage, education, house construction, etc.

How to open an EPF account

In India, an Employee Provident Fund (EPF) account can only be opened by an employer on behalf of an employee. It is mandatory for an employer to open an EPF account. However, individuals cannot open an EPF account in their name.

To open an EPF account, the employer must register their establishment online. The employer will need to provide the following details:

• Establishment details, including the name, address, incorporation date, PAN, and type of establishment.
• If the establishment is a factory, the factory license number, date of license, and place of issue of the license.
• If the establishment is an MSME, the MSME registration details.
• If the establishment is registered under Startup India, the Startup India registration details.
• Email ID and mobile number of the authorised person.
• Contact person details, including name, date of birth, gender, PAN, designation, date of joining, and address.
• Employment details, including employee strength, gender, wages, and total wages.
• Branch details, including name/premise number, LIN (Labour Identification Number), and address.
• NIC Code (National Industrial Classification) and nature of business.

The employer will also need to follow these steps:

• Visit the EPFO website and click on "Establishment Registration".
• Register on the USSP (Unified Shram Suvidha Portal) by clicking the "Sign Up" button.
• Log in to the USSP and select "Registration for EPFO-ESIC". Then, select "Apply for New Registration".
• Choose the "Employees' Provident Fund and Miscellaneous Provision Act, 1952" option and click "Submit".
• Fill out the registration form, providing all the required details, including establishment details, e-contacts, contact person information, identifiers, employee details, branch/division details, activities, and attachments.
• Upload the required documents, including the PAN card, proof of address, Aadhaar card, GST certificate, digital signature, cancelled cheque or bank statement, hired/rented/leased agreement, and license proof.
• Attach the Digital Signature Certificate (DSC).

Once the above steps are completed, the employer will receive a confirmation message and email regarding the successful completion of the registration form.

EPF vs PPF

The Indian government introduced the Employees' Provident Fund (EPF) and Public Provident Fund (PPF) to encourage saving among the population. Both are government-backed savings instruments, but there are some key differences between the two schemes.

Eligibility

EPF is only open to salaried employees of companies registered under the EPF Act, which means companies with 20 or more employees. Self-employed and retired individuals are not eligible for EPF. On the other hand, anyone can open a PPF account, including students, the self-employed, salaried employees, and retired persons (except for NRIs).

Contribution

For EPF, both the employer and employee are required to contribute 12% of the employee's basic salary and dearness allowance every month. This contribution is compulsory. For PPF, there is no such restriction, and anyone can contribute any amount, subject to a minimum of Rs 500 and a maximum of Rs 1.5 lakh per year.

Interest Rate

The EPF interest rate is declared annually by the EPFO and was 8.25% for the financial year 2023-24. The PPF interest rate is reviewed every quarter and was 7.1% for Q3 FY 2024-25. Historically, the EPF rate has been slightly higher than the PPF rate.

Tenure

PPF accounts have a term of 15 years, which can be extended indefinitely in blocks of 5 years. EPF accounts do not have a specified term but can be closed when an employee quits their job permanently or is unemployed for an extended period.

Liquidity

EPF is considered more liquid than PPF, as withdrawals from PPF are only allowed after 5 years from account opening. With EPF, you can withdraw 75% of your corpus if you have been unemployed for a month, and the entire corpus if unemployed for two months.

Tax Benefits

Both EPF and PPF offer tax benefits under Section 80C of the Income Tax Act. Contributions to EPF of up to Rs 1.5 lakh per annum are tax-deductible, and interest is tax-free unless the employee is unemployed. Withdrawals from EPF are also tax-free if made within 5 years of opening the account. For PPF, investments of up to Rs 1.5 lakh per annum are eligible for a tax deduction, and the maturity amount is also tax-free.

EPF withdrawal rules

The Employees' Provident Fund (EPF) is a popular savings scheme introduced by the Employees' Provident Fund Organisation (EPFO) under the Government of India. The EPF is a mandatory savings and retirement scheme for employees, where both the employee and the employer contribute 12% of the employee's basic salary and dearness allowance. The accrued interest on the EPF is tax-free and can be withdrawn without incurring charges.

• EPF withdrawals are not permitted until the time you are employed.
• You can withdraw up to 75% of your funds if you are unemployed for at least one month, and the remaining balance if unemployed for two months or more.
• Withdrawals of ₹50,000 or more within five years of opening your EPF account will attract a Tax Deducted at Source (TDS) of 10% if you have a valid PAN card in India, or 30% if you don't.
• You can avoid TDS deduction by producing Form 15H or Form 15G.
• You can get a loan against your PF savings if you have been in continuous service for a specified number of years.
• When you change jobs, you don't need to withdraw the balance from your old PF account. The money can be transferred as long as your Universal Account Number (UAN) is active and you have submitted the relevant forms.
• You can withdraw your full PF balance if you have been unemployed for at least two months or if there is a gap of more than two months between leaving one job and joining another.

There are several circumstances under which you can make partial or complete withdrawals from your EPF:

• For Educational Purposes: You can withdraw up to 50% of your total contribution to your EPF (only the employee's contribution) for the education of your children after class 10, or for your own higher education.
• For Medical Treatment: The hospitalisation period must exceed one month, or you must be admitted for major surgery. You can withdraw up to six times your monthly salary (basic + dearness allowance) or the employee's share with interest, whichever is lower.
• For Repaying Existing Debt: You can withdraw an amount equivalent to 12 times your monthly salary to repay your existing home loan, but you must have completed five years of continuous service to be eligible.
• During Unemployment: You can withdraw 75% of the accumulated amount if you have been unemployed for more than a month, and the remaining 25% if unemployment exceeds two months.
• For Wedding Expenses: You can withdraw up to 50% of the amount you have contributed towards your EPF, along with the interest accumulated, for your wedding or that of a sibling or child. This benefit is available after completing at least seven years of continuous service.
• For Renovating Your House: The house must be in your name or your spouse's name, or jointly owned. You must have completed five years of continuous service and can withdraw up to 12 times your monthly salary (basic + dearness allowance) or the employee's share with interest, whichever is lower.
• For Construction or Purchase of a House: The house or land must be in your name, your spouse's name, or both. You must have completed at least five years of continuous service and can withdraw basic salary plus dearness allowance for up to 24 months, or 36 times your monthly salary for purchasing and constructing a house, whichever is lower.

Taxation and Other Considerations:

• Withdrawals from the EPF are tax-free if made within five years of creating the account.
• TDS is deducted at a rate of 10% on withdrawals if a PAN is furnished, and 20% if no PAN is provided.
• TDS is not applicable if the withdrawal amount is less than ₹50,000.
• TDS is also not applicable in certain cases, such as termination of service due to company lockout or retrenchment, or if the service cannot be continued due to a serious medical condition.
• To avoid TDS, do not withdraw your EPF corpus when changing jobs; instead, transfer the EPF account to your new job.
• Withdrawals of the corpus accumulated in the EPF account after retirement are completely tax-free, but the interest earned on the EPF corpus after retirement is taxable.
• If you do not withdraw funds for three years after retirement, you will have to pay tax on the interest earned.
• EPF members can utilise their accumulated funds to facilitate their housing needs after three years of account opening.
• EPF members can withdraw 90% of their EPF corpus one year before retirement, provided they are not less than 54 years old.

Withdrawal Process:

The EPF withdrawal process can be done online or offline. For online withdrawal, you need to submit a withdrawal application through the EPF online portal, while for offline withdrawal, you need to submit a 'new composite claim form' or a 'composite claim form' to the EPFO office under their jurisdiction.

EPF investment options

The Employees' Provident Fund (EPF) is a popular savings scheme introduced by the Employees' Provident Fund Organisation (EPFO) under the supervision of the Government of India. The EPF interest rate is declared each year by the EPFO and currently stands at 8.25%.

Only employees of companies registered under the EPF Act can invest in the EPF. Both the employer and employee are required to contribute 12% of the employee's basic salary and dearness allowance every month to the EPF account. This contribution is tax-deductible under Section 80C of the Income Tax Act, up to Rs. 1.5 lakh per annum.

• Fixed Deposits (FDs): FDs offer assured returns on your principal amount, high-interest rates, and flexible tenors. You can choose periodic gains and your principal amount remains unaffected by market forces.
• Shares and Mutual Funds: These market-linked securities can provide high-interest rates over a short period. Mutual funds can offer a return of up to 20% based on your portfolio. These options are highly liquid, allowing you to exit your investment at any time. However, they are high-risk options and require close monitoring.
• Senior Citizen Savings Scheme (SCSS): This is an investment option specifically for senior citizens, offering an interest rate of up to 7.4% for a 5-year investment period. You can invest anywhere from Rs. 1,000 to Rs. 15 lakh. It is a stable, government-backed investment option.
• Real Estate: Investing in real estate can offer a high rate of return and can also hedge against inflation. You can purchase residential or commercial properties and put them up for rent, or sell them when property prices are high.

Frequently asked questions