EPF Eligibility: Who Qualifies and How It Works 

Introduction 

In India, both government and non-government bodies offer various retirement schemes to help individuals build a secure retirement fund. One such government-backed scheme is the Employees’ Provident Fund, commonly known as EPF. 

Managed by the Employees’ Provident Fund Organisation (EPFO), EPF is a fixed-income savings scheme designed primarily for salaried individuals. This article will explore EPF, including its eligibility criteria and withdrawal process. 

EPF eligibility criteria for employees and employers

For employers 

• Organisations with 20 or more employees must mandatorily register for the EPF scheme. 
• Organisations with fewer than 20 employees can opt for the scheme voluntarily. 

For employees 

• EPF enrolment is mandatory for employees earning up to ₹15,000 per month. This amount includes basic wages and dearness allowance. 
• Individuals earning more than ₹15,000 per month can opt for EPF voluntarily. However, they will need approval from their employer and the Assistant PF Commissioner. 

Note: You can opt out of EPF even if you earn up to ₹15,000 per month. However, you must do this at the start of your career by filling out Form 11. You can choose to join the EPF program later. Once enrolled, you cannot opt out unless your future organisation is exempt from EPF registration. 

How EPF works

Interest mechanism

Under the EPF scheme, both the employer and the employee contribute to the employee’s EPF account. The contributions earn interest at a fixed rate, which is reviewed at the end of each financial year. Although the interest is calculated monthly, it is credited to the EPF account at the end of the financial year. Over time, the account balance grows because of compounding since you earn returns on the initial contributions as well as the accumulated interest.  

Contributions 

Employee contribution: The employee contributes 12% of their salary (basic wages + dearness allowance + retaining allowance) to EPF. The rate reduces to 10% if the organisation has fewer than 20 employees. 

Employer contribution: The employer also contributes 12% of the employee’s salary. However, only 3.67% of the total goes to the EPF account; the remaining 8.33% is allocated to the Employee Pension Scheme (EPS), subject to a maximum of ₹1250 per month.  

Let’s understand this with the help of an example. 

Say you earn ₹1 lakh per month. In this case, you will contribute ₹12,000 to EPF (12% of ₹1 lakh). Your employer, on the other hand, will contribute ₹3670 to EPF and ₹1250 to EPS. 

EPF withdrawal rules and process 

You are allowed to withdraw from your EPF fully and partially, subject to certain conditions.

• Full withdrawal 

You can withdraw 100% of your EPF account balance under the following conditions:  

1. Upon retirement, i.e., on attaining the age of 58 years. 
2. In case of premature death, your nominee will receive the amount 
3. If you have been unemployed for two months or more

• Partial withdrawal 

You are allowed to make partial withdrawals under certain conditions: 

• Unemployment 

You can withdraw up to 75% of your EPF balance if you are unemployed for at least one month. If you remain unemployed for two months or more, you can withdraw the remaining 25% as mentioned above. 

• Special circumstances 

Premature withdrawals are permitted only under the following special circumstances, subject to certain conditions. 

• Purchase of a house/flat or construction of a house, including site acquisition 
• Repayment of loans in special cases
• Medical purposes 
• Marriage or post-matriculation education of children 
• Withdrawal within one year before retirement 
• Other special cases, such as the dismissal of an employee challenged by them in court

Tax implications on EPF withdrawal 

If you withdraw your EPF balance before completing five years of continuous service, the amount withdrawn may be subject to tax, except in specific cases such as withdrawal due to ill health. Additionally, Tax Deducted at Source (TDS) may apply in certain cases.

EPF withdrawal process

You can withdraw your EPF balance in two ways: 

Offline 

Step 1: Visit the official website of EPFO and download the Composite Claim Form from the Universal Account Number (UAN) portal. 

Step 2: Choose between an Aadhaar-based or a Non-Aadhaar-based form. 

Step 3: 

• Aadhaar-based: Submit the form to the respective jurisdictional EPFO office; no attestation is needed from the employer. 
• Non-Aadhaar-based: If your Aadhaar and bank details are not updated on the UAN portal, your form will need your employer’s attestation. 

Online

Step 1: Visit the UAN portal and log in with your UAN and password. 

Step 2: Check if your Know Your Customer (KYC) details are verified. 

Step 3: Once verified, go to ‘Online Services’ and click on ‘Claim (Form-31,19,10C&10D)’. 

Step 4: Check your member, KYC and service details, and enter your bank account number.

Step 5:  Sign the Certificate of Undertaking and proceed with the online claim. 

Step 6: Select the applicable claim type: full EPF settlement, EPF part withdrawal (loan/advance) or pension withdrawal.

Step 7: Select the applicable form and provide the purpose of withdrawal, the amount required and your address. 

Step 8: Fill in the required details, review the information, and submit your application. 

Conclusion 

EPF is a government-backed retirement savings scheme that helps salaried individuals secure their financial future. Both the employee and the employer contribute to the scheme, which earns a fixed annual interest. Understanding this provident fund’s eligibility, contribution rules, and withdrawal process is essential for making informed retirement planning decisions.