EPFO

30th March, 2023 Economy

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Context

EPFO decided to recommend an increase of 0.05% in the interest for Provident Fund deposits.
The new rate, applicable for 2022-23, will be 8.15%.

About EPFO

The Employees' Provident Fund Organisation(EPFO) is one of the two main organizations under the Government of India's Ministry of Labour and Employment .
The Employees' Provident Fund Organisation (EPFO) is a non-constitutional body that promotes employees to save funds for retirement. It was launched in 1951.
It is responsible for regulationand management of provident funds in India, the other being Employees' State Insurance.
The EPFO administers the mandatory provident fund, a basic pensionscheme, and a disability/death insurance scheme.
It also manages social security agreements with other countries. International workers are covered under EPFO plans in countries where bilateral agreements have been signed.

CBT

The EPFO's top decision-making body is the Central Board of Trustees (CBT), a statutory body established by the Employees' Provident Fund and Miscellaneous Provisions (EPF&MP) Act, 1952.
The Board administers a contributory provident fund, pension scheme and an insurance scheme for the workforce engaged in the organized sector in India. The board is chaired by the Union Labour Minister of India.
Presently, the following three schemes are in operation under the Act:

1. Employees' Provident Fund Scheme, 1952
2. Employees' Deposit Linked Insurance Scheme, 1976
3. Employees' Pension Scheme, 1995 (replacing the Employees' Family Pension Scheme, 1971).

Universal Account Number (UAN)

All subscribers of EPF can access their PF accounts online and perform functions like withdrawal and checking EPF balance. The Universal Account Number (UAN) makes it convenient to login to the EPFO member portal.
The UAN is a 12-digit number allotted to each member by EPFO. The UAN of an employee remains the same even after he/she switches jobs. In the event of a job change, the member ID changes, and the new ID will be linked to the UAN. However, employees must activate their UAN in order to avail the services online.

PF Contribution

The employer's contribution is divided into the below mentioned categories:

Category	Percentage of contribution (%)
Employees Provident Fund	3.67
Employees' Pension Scheme (EPS)	8.33
Employee's Deposit Link Insurance Scheme (EDLIS)	0.50
EPF Admin Charges	1.10
EDLIS Admin Charges	0.01

It is mandatory for the employee and the employer to make a EPF contribution. Each make a 12% contribution of the employees' dearness allowance and basic salary towards EPF. Given below are the details of the employees' and employers' contribution towards EPF.

Employee's contribution towards EPF -12% of the employee's salary is deducted by the employer on a monthly basis for contribution towards EPF. The entire contribution goes towards the EPF account.
Employer's contribution towards EPF -The employer also contributes 12% of the employee's salary towards EPF.

EPF Benefits

It helps in saving money for the long run.
There is no requirement to make a single, lump-sum investment. Deductions are made on a monthly basis from the employee's salary and it helps in saving a huge amount of money over a long period.
It can help an employee financially during an emergency.
It helps in saving money at the time of retirement and helps an individual maintain a good lifestyle.

EPF Interest Rate

Earlier, PF interest rate was 8.10%. Now, it has been revised o 8.15%.

EPF Eligibility

The eligibility criteria in order to join the EPF scheme are mentioned below:

It is mandatory for salaried employees with an income of less than Rs.15,000 per month to register for an EPF account.
As per law, it is mandatory for organisations to register for the EPF scheme if they have more than 20 employees working for them.
Organisations with less than 20 employees can also join the EPF scheme on a voluntary basis.
Employees who earn more than Rs.15,000 can also register for an EPF account; however, they must get approval from the Assistant PF Commissioner.
The whole of India (except the states of Jammu and Kashmir) can benefit from the provisions in the EPF scheme.

PF Withdrawal Online

It is possible to partially withdraw from the EPF account for the purchase of a house, wedding expenses, or for medical expenses. The amount of money that can be withdrawn will based on the reasons for the withdrawal. It should be noted that there is a lock-in period for partial withdrawal and this also varies based on the withdrawal purpose.
The entire PF amount can be withdrawn under several circumstances. Some of these include the attainment of retirement age, resignation due to permanent total mental/bodily incapacity, permanent relocation to other countries, death of the member, etc.

Given below are some of the reasons why EPF should not be withdrawn before 5 years of service:

Section 80Cbenefits cannot be availed: In case individuals have been claiming benefits under Section 80C of the Income Tax Act and they withdraw their PF amount completely, the interest that has been earned on the employee's contribution must be taxed.
The amount will be taxed: In case any PF withdrawal is done within 5 years of service, the amount that is withdrawn is added to the taxable income. In case the amount that is withdrawn is more than Rs.50,000 and the withdrawal is done within 5 years, there is a 10% tax cut on the amount. However, on submitting Form 15G and 15Hwith the Income Tax (IT) Department, individuals are exempted from paying this amount.

PRELIMS PRACTICE QUESTION

Q. Which of the following statements are correct with respect to Employees' Provident Fund?

a) It is mandatory for salaried employees with an income of less than Rs.20,000 per month to register for an EPF account.

b) 12% of the employee's salary is deducted by the employer on a monthly basis for contribution towards EPF.

c) The UAN is a 12-digit number allotted to each member by EPFO and the UAN of an employee remains the same even after he/she switches jobs.

d) Employees' Provident Fund Organisation (EPFO) is a constitutional body that promotes employees to save funds for retirement. It was launched in 1951.

1) a and b

2) b and c

3) b and d

4) b, c and d

Answer: Option 2.