Employee Provident Fund

Employees Provident Fund (EPF) is a statutory retirement benefits scheme under the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The Employees Provident Fund Organization (EPFO) administers the EPF scheme. Organizations across the formal sector with an employee strength of 20 or more get mandatorily covered by the Employee Provident Fund scheme provisions.

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EPF is a widespread scheme. Let us explore its various features and benefits to understand what makes it so popular.

What is EPF?

EPF is a post-retirement benefit scheme for ensuring a secured future for salaried employees. 

Under EPF Scheme 1952, both the employer and employee have to provide an equal monthly contribution at the rate of 12% of the basic salary plus dearness allowance (10% in certain cases).

Out of this, 8.33% of the employer's EPF contribution is towards the Employee Pension Scheme.

EPF Contribution 

The employer contributes a fixed percentage of the basic salary (including DA) towards the EPF on or before every month's due date. For most entities, the EPF contribution rate is 12%. 

10% EPF rate is applicable for:

  • A company with employees less than 20 employees

  • An industrial company declared as ‘sick’ by the Board for Industrial and Financial Reconstruction

  • An enterprise that has accumulated losses equal to or exceeding its entire net worth at the end of any financial year

  • Enterprises in the jute, beedi, brick, coir, and guar gum sector

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*The investment risk in an investment portfolio is to be borne by the policyholder

EPF Interest

The current EPF interest rate for the fiscal year 2020–21 is 8.5% p.a. The interest on EPF gets calculated every month along with interest earned credited to the EPF account every year. The interest corpus is made available to the employee post-retirement or when they leave the employment on fulfilment of certain conditions. 

EPF Eligibility Criteria

To receive EPF benefits, you must fulfil the following criteria:

  • A formal sector organization with 20 or more employees must mandatorily register with the EPFO.

  • Organizations having less than 20 employees can register with the EPFO voluntarily.

  • All salaried employees are eligible for EPF.

  • Employees earning less than Rs. 15,000 have to register to the EPF scheme mandatorily.

  • Employees making more than Rs. 15,000 can voluntarily opt for the EPF scheme.

  • The EPF scheme is applicable across all states of India except Jammu and Kashmir.

 EPF Claim

The employee can avail of the accumulated EPF corpus at the time of retirement or when leaving the service, provided the requisite criteria get fulfilled. In the case of deceased employees, their dependents can avail themselves of EPF benefits.

Key EPF Forms

Different EPF forms must be filled while undertaking various activities, including registration, withdrawal, transfer of EPF, and availing of loans. 

These are some key EPF forms: 

EPF Form Purpose
Form 31 EPF Withdrawal
Form 14 Purchase of LIC policy from EPF account
Form 13 EPF Account Transfer
Form 2 EPF Declaration and nomination form
Form 19 EPF Final Settlement to the employee
Form 20 EPF Final settlement to the nominee in case of death of the employee
Form 5 New employee registering for EPF scheme
Form 11 Auto transfer of EPF

EPF Withdrawal

As per the new EPF Withdrawal Rules 2021, key EPF withdrawal pointers are:

  • EPF amount can be fully withdrawn only on retirement. Early retirement is when the person has crossed 55 years.

  • Partial withdrawal of EPF is permitted only when there is a medical emergency, house construction/purchase, or for higher education.

  • 90% of EPF corpus can be withdrawn one year before retirement.

  • Employees can withdraw the EPF corpus if they remain unemployed before retirement due to lockdown or retrenchment.

  • Only 75% of the EPF amount can be withdrawn after one month of unemployment. The remaining amount gets transferred to the new EPF account when the individual finds employment again.

Note: Employer approval is not required for withdrawing EPF funds. Employees can get online approval by linking their UAN and Aadhaar to their EPF account.

Key Benefits of EPF

Some key benefits of the Employees Provident Fund are:

  1. Allows for loans against EPF

    An EPF account holder can get loans against their EPF account balance. The said loan has to be repaid within 3 years from the date of disbursal. Interest on the loan is charged at a minimal rate of 1% p.a. for any financial emergency.

  2. Free insurance

    The EPFO provides the Employees Deposit Linked Insurance (EFLI) scheme to EPF holders upon joining. There is no insurance premium to be paid by the EPF account holder for the death cover. The maximum free insurance eligible for employees is currently capped at Rs. 7 lakhs.

  3. Home loan

    As per the EPFO’s rules, one can withdraw up to 90% of the EPF balance for purchasing or constructing a new home.

  4. Partial EPF withdrawal during emergency

    EPFO rules allow for partial withdrawal of funds during a financial emergency.

  5. Pension benefits

    An EPF holder is eligible for pension post-retirement. However, they should have contributed monthly PF for a minimum of 15 years towards their EPF account.

  6. Exemption from TDS

    An employee’s EPF contribution is not taxable. The employer’s contribution becomes taxable if it exceeds RS. 7.5 lakhs in a financial year. 

    Note: The tax benefit is subject to changes in tax laws.

In Conclusion

In summation, the Indian government launched the EPF as a post-retirement scheme to promote savings among salaried employees and help them accumulate a substantial retirement corpus. 

EPF allows for loans to be taken against the balance, which is tax-exemptible. It provides pension benefits and financial cover for insurance and emergencies.


  • How to register for the EPF scheme?

    One can register for the EPF scheme by visiting the official website of EPFO.
  • What is the due date for EPF payment?

    EPF payments are due on the 15th of each month. 
  • On what basis is the EPF contribution paid?

    The EPF contribution is paid on the maximum wage of Rs. 15000 by both employee and employer. 
  • Can an employee make higher EPF contributions?

    Yes, employees can also contribute to EPF at higher rates. However, their employer is not obligated to do the same.
  • Is EPF interest provided on non-operative accounts of retired employees?

    EPF interest is not provided on any amount deposited in non-operative accounts of retired employees.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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