Employee Provident Fund (EPF): Check latest news, rates, updates & more

EPFO latest news: The Employee Provident Fund Organisation (EPFO) has announced a new service – ‘Nirbadh Sewa’ in the New Year 2023. Using this facility, members registered with the EPFO can get pension without any delay within a few days of their retirement. EPFO shared the benefits of ‘Nirbadh Sewa’ through an infographic on its official Twitter handle. 

EPF Nirbandh Sewa: Why is the government coming up with this initiative? 

• Previously, EPFO members used to face many hassles generating their PPO numbers for their post-retirement pension. To help users to deal with this issue, EPFO has come up with training related to PPO and pension through Webinars under Nirbadh Service. “Employees retiring within 3 months are being invited for guidance and training in webinars along with employers,” the organisation said. 

EPFO explained: What is EPFO?

We all want to save for our retirement to live the second inning of our life comfortably. There are many financial assets that we can use to invest for retirement goals. One of the safest options to consider is the Employee Provident Fund (EPF). In this article, we will understand everything related to EPF.

EPFO details: What is a provident fund?

EPF, also popularly known as the provident fund, is a scheme in which your employer deducts a fixed sum from your monthly salary and puts it along with your contribution in the EPF account. The amount accumulated over the years can be used to avail of a loan or withdraw it post-retirement to fund your monthly expenditure.

EPF History

The EPF scheme started in 1952, and the goal of the scheme was to provide millions of Indian employees with better social security and a secure future for all the hard work they do in their work tenure. The scheme was implemented under the Employees' Provident Funds Act. Since the launch of the scheme, it is a compulsory contribution the employee and employer need to make. The body that is responsible for its maintenance is the Ministry of Labour & Employment.

EPFO Full form

EPFO stands for Employees' Provident Fund Organization. It is a statutory body that the Government of India created to provide social security in India.

Understanding EPF contribution

The EPF contribution consists of two parts:

Employee contribution: It is a contribution made by an employee and this contribution accounts for 12% of the employee's salary. It is deducted every month by the employer.

Employer contribution: It is the contribution made by the employer, and the contribution number is the same - 12%. The 12% from an employer contribution, gets divided into the below section:

• 3.67% into EPF
• 8.33% into EPS
• 0.5% into EDLIS
• 0.85% for EPF Administrative Charges
• 0.01% for EDLIS Administrative Charges

The interest is calculated every month for your EPF account, but it gets deposited at the end of the financial year.

What is an EPF account?

To manage your monthly salary, you have a bank account. The EPF account is described as the account where your EPF is invested. Once you sign up for the EPF, your EPF contribution is created to your EPF account every month. You can check the balance using different options - EPFO portal, Mobile app, etc. Similar to your bank account, you get a UAN number which is your EPF account number.

EPFO terms: What is UAN?

UAN stands for Universal Account Number. It is a unique 12-digit number for those enrolled under the EPF scheme. UAN is a unique number assigned to each employee. It remains permanent even when an individual changes their employment. 

UAN can be generated by logging in to the EPFO website. Once you have registered your UAN, you will receive details like the EPF balance on your mobile phone via SMS.

Tax benefits of EPF investment

Employer’s contribution to EPF account is exempt from tax. This exemption is subject to 12% of your basic salary plus DA. The employee contribution toward EPF is eligible for tax deduction under section 80C. Also, the interest on the employer’s contribution is exempt from tax. The interest in the employee’s contribution is also tax-exempt.

Tax implication when you withdraw your EPF investment

EPF investment is for your retirement. However, there are instances when you can withdraw your EPF corpus beforehand - marriage, building a house, education, medical emergencies, etc.

However, you should not withdraw your funds before five years. If you withdraw your EPF amount before the five years, the withdrawn amount gets added to your taxable income and taxed as per your tax slab. If you withdraw your funds after five years, there is no tax liability.

EPF interest rate

The interest rate for your EPF contribution is reviewed every year. The interest rate is applicable for the financial year (between April and March) and not the calendar year. The EPF interest rate for FY23 is 8.10. 

As mentioned above, the EPF rate is calculated monthly but is credited at the end of the financial year. The transferred interest is added to the April balance (of the new FY) and then used for interest calculation. If you don't make any contribution to your PF account for 36 months straight, your account becomes dormant.

Benefits of EPF - Why should you invest in EPF?

Below are some benefits of investing in EPF:

• It helps to save and invest without too much effort - everything is automated.
• EPF is created to fund your retirement so you can live comfortably post-retirement.
• You can invest monthly and build a corpus over the years which is tax-free.
• You get inflation-beating returns that can create wealth in the long term.
• It can act as your financial backup in case of emergency.