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 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 fund
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 schemes. Additionally, to know more about the recognized provident fund, refer here: Provident Fund PF. Any firm with a minimum of 10 employees must/have to register under the Employee Provident Fund Act.
3. Unrecognized provident fund
Under this provident fund scheme, a company registers for the provident fund. Still, the commissioner of income tax does not accept it. Upon withdrawal, the authorities do not impose a tax on the amount, but they do tax the interest earned thereon. Additionally, the interest is subject to taxation.
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
1. Tax-free
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 of completion of 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.
3. Unemployment
Under any circumstances, if an employee loses his/her job, these funds help in need.
4. Death
In case of sudden death, the Employee nominees receive the total amount and interest.
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.
The 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 the 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 purposes
For the treatment of self, spouse, parents, and children, an employee can withdraw up to 6 times the monthly salary.
Types of EPF forms
1. Form 5
Regularly, the employer fills out Form 5, providing details of new employees registering for the Employee Provident Fund. You must promptly submit this form to the commissioner’s office before the 25th of the following month.
2. Form 10C
The document serves as a means to claim the withdrawal of the pension amount. You can withdraw only after completing 180 days of continuous service and before reaching 10 years of service.
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
You can use this form to transfer your old EPF account to a new one. However, it has been linked with a composite claim form, allowing you to apply for the transfer directly when switching jobs.
5. Form 14
You can use this form to pay your LIC policy directly from your PF account. After filling out the form, your employer must verify it, and then you need to submit it to the EPF commissioner.
6. Form 19
You can use it to withdraw the PF amount in case of termination, retirement, or quitting your job. You can only withdraw the amount if you meet the condition of being 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 have the option to withdraw the funds partially. You can fill out the form both online and offline.
