With the cost of living continuing to rise rapidly, the salaried class needs a substantial corpus to manage post-retirement expenses. While investing early in mutual funds and similar avenues can be highly beneficial, EPF (Employees’ Provident Fund) contributions play a major role in navigating the post-retirement life of the salaried.
If you work with an employer who is registered as an ‘establishment’ (defined as those employing more than 20 persons) under the EPF and Miscellaneous Provisions (EPF and MP) Act, 1952 and your salary (basic plus dearness allowance (DA)) is more than ₹15000 per month, you can be enrolled as a member of EPF. Once you become a member of EPF, a specified amount (typically 12% of salary plus DA, but employees alone are allowed to contribute more) is deposited into your PF account with a matching contribution from the employer each month that goes on to build your basic retirement corpus. The rules governing PF are quite simple. Here is a guide on EPF and the important rules that it has for employee members.
Who can become a member of the EPF? What are the benefits?
“Employees who are drawing the basic wages and dearness allowance up to ₹15000 are alone eligible to become a member,” according to EPF Organisation (EPFO). She/he will remain a member even when her/his pay exceeds ₹15000. However, her/his contribution (voluntary plus mandatory) to the fund is capped at ₹15000 per month.
The member can also contribute to higher wages, i.e. more than ₹15000 after getting permission from the PF authorities as per the provisions of the ‘Scheme’. “The employer is also required to pay his matching contribution up to ₹15000. Employees drawing more than ₹15000 can also become a member of EPF by giving the option under para 26(6) of the EPF Scheme. The option has to be submitted to the EPF office within six months of joining such a member,” EPFO said.
“On joining the EPF, the member is provided the benefits under ‘Pension’ (restricted to employees with ₹15000 or less as monthly wages) and Employees’ Deposit Linked Insurance (EDLI) Scheme,” it said. There is no age restriction for becoming a member of EPF, and a person can remain a member if she/he continue to work even after retirement. But a person who has achieved superannuation cannot continue as a member under the ‘Employees’ Pension Scheme (EPS)’.
The compound interest is credited by EPFO on a monthly running balance basis at the statutory rate declared for each year. For 2024-25, EPFO declared an interest of 8.25%. A majority of employees and the employer can also voluntarily opt for joining EPF under ‘Section-1(4) of the Act (Voluntary Coverage)’.
How long can a member retain PF in their/his account?
The membership can be retained till a member withdraws all the PF dues. But if the PF account does not receive any contributions for more than three years, interest will not be credited after the end of the third year.
How is the period of non-employment between two spells of employment treated under EPF?
Non-employment for brief intervals does not affect PF significantly, but it affects the calculation of service to determine the quantum of pension under EPS. As mentioned earlier, you will not earn any interest on the PF account if there is no contribution for more than 3 years.
What happens when the employee shifts jobs?
The employee should be enrolled as a member of the PF of the new employer and can transfer his PF from her/his previous PF account. “On change in employment, the member should necessarily get his PF account transferred to present establishment, duly submitting ‘Form 13(R)’. A member can submit claim for transfer online using member interface at unified portal,” EPFO said.
Can the PF money be recovered against any liability of the member? What options does an employee have if the employer fails to pay the PF deduction to EPF?
PF money cannot be attached for recovery against any debts incurred by the member. “The amount standing to the credit of any member in the ‘Fund’ (or of any exempted employee in a provident fund) shall not in any way be capable of being assigned or charged and shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the member 2[or the exempted employee], and neither the official assignee appointed under the Presidency-towns Insolvency Act, 1909 (3 of 1909), nor any receiver appointed under the Provincial Insolvency Act, 1920 (5 of 1920), shall be entitled to, or have any claim on, any such amount,” according to EPF and MP) Act, 1952.
The Employees’ PF Organisation will invoke penal provisions of the ‘Act’ to recover the dues from the employer. A complaint can be lodged with the police under relevant provisions of the law by the EPFO for action against such employers.
“The Annual P.F. Statement of Account/Member Passbook will indicate the amount paid by the employer. The default period in a year is thus made known to the members,” EPFO said. “In the current scenario if the member has activated her/his UAN (Universal Account Number) the non-payment/payment of contributions can be verified every month through the e-passbook. Currently, members also receive SMS on their registered mobile phones on credit of monthly contribution into their PF account,” it said.
What happens to the EPF membership during closure, lock-out/strike in an establishment?
The EPF membership will continue during such a timeframe. Since wages/salary will not be paid, no amount will be deducted for contribution to the PF account.
If the employer has a private ‘PF Trust’, can the employee join it without enrolling under EPF?
The employee can join the private ‘PF Trust’, but the employer should get an exemption from the EPF scheme. The employee will, however, be governed by the ‘Pension’ and EDLI schemes. “All private trusts must obtain exemption from EPFO to enjoy Income Tax benefits,” EPFO said.
All departments and branches under an establishment are covered under the EPF Act. “For the removal of doubts, it is hereby declared that where an establishment consists of different departments or has branches, whether situate(d) in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment,” according to the EPF and MP Act, 1952.
How is membership regulated if a person is working in more than one establishment?
The membership of the person is considered separately for each establishment. She/he will be provided separate ‘PF Account Numbers’ and ‘Member IDs’.
