What is an Employee Provident Fund?
EPF or Employee provident fund was introduced under the Employee provident fund and miscellaneous act in the year 1952. It is a mandatory government-managed savings scheme available to all the employees with a monthly salary less than or equal to INR 15,000. The due date of both PF return and payment is on or before the 15th of every next month.
4 types of employee provident funds
1. General/Statutory provident fund
It is a PF account that is available to only government employees in India. The employees can contribute a minimum of 6% of their salary and the total amount is paid to the employee at the time of their retirement.
2. Recognized provident fund
It is one of the most popular PF. To know more about the recognized provident fund, refer here: https://www.sumopayroll.com/resources/provident-fund-pf/. Any firm with a minimum of 10 employees must/have to be registered under the employee provident fund act.
3. Unrecognized provident fund
A provident fund scheme where a company registers for the provident fund but is not accepted by the commissioner of income tax. Upon withdrawal, no tax is imposed on the amount but thereon interest is taxable.
4. Public provident fund
This scheme is available to all in general, whether employed or unemployed. Under Section 80C of the income tax act, deposits as well as interest on the investments under PPF, are tax exempt.
Benefits of Employee provident fund
This scheme provides a certain interest on the amount you deposit. The interest earned is tax-free except if any premature withdrawal(before 5 years completion service) is made.
2. Long term security
Employees can withdraw their full PF balance before they turn 58 years of age. So, they cannot withdraw easily which helps in savings.
Under any circumstances, if an employee loses his/her job, these funds help in need.
In case of sudden death, the total amount along with interest is given to the employee nominees.
5. Get a loan
An employee is eligible to take a loan only if there is an emergency. You have to submit Form 31 to withdraw the amount.
Following are the criteria to avail loan
1. For Marriage/Education
An employee can withdraw up to 50% of his contributions but only under the condition that the employee must complete 7 years of service.
Note – For education, only after 10th standard.
2. For house construction/purchasing plot
The property must be registered under the employee/spouse or jointly held. And the employee must complete a minimum of 5 years of service.
3. For medical purpose
For the treatment of self, spouse, parents, and children, an employee can withdrawal up to 6 times the monthly salary.
Types of EPF forms
1. Form 5
Form 5 is filled by the employer every month stating the details of new employees registering for the employee provident fund. This form has to be submitted to the commissioner’s office before the 25th of next month.
2. Form 10C
It is a document that is used to claim the withdrawal of the pension amount. The amount can be withdrawn only after 180 days of continuous service and before the completion of 10 years of the service period.
3. Form 10D
The purpose of this form is to get pension benefits after retirement. An employee is eligible when he is more than 50 but less than 58 years of age.
4. Form 13
This form is used to transfer your old EPF account to a new one. However, this form has been linked up with a composite claim form where the transfer can be applied directly at the time of switching jobs.
5. Form 14
This form is used to pay your LIC policy directly from your pf account.n After filling this form, you have to get verified by your employer and submit it to the EPF commissioner.
6. Form 19
It is used for the withdrawal of pf amount in case of any termination or retirement or if you quit your job. You can only withdraw the amount if you satisfy the condition – an employee has to be unemployed for at least 2 months.
7. Form 20
The nominees of the employee have to fill up this form to withdraw the amount in case of unfortunate death. If the nominee is minor or disabled then the guardian has to fill it up on his/her behalf.
8. Form 31
Under certain conditions, employees are allowed to withdraw the funds partially. The form can be filled in both online and offline.