How to Create an Employee Provident Fund (EPF) Account

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How to Create an Employee Provident Fund (EPF) Account

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EPF is considered one of the most systematic investment plans for employees, helping them save a portion of their salaries during their employment. But many of you have a common question: How to create an employee provident fund account? Well, we have answers to all your queries.

What is an EPF Account?

EPF stands for Employee Provident Fund. It is a compulsory savings scheme for Indian workers, which offers them a variety of benefits. It is one of the most secured investments, and hence, employees should know how to create an EPF account.

An EPF account is a retirement savings account in which employees of an organisation contribute a portion of their salary to the employee's provident fund. This helps to build their retirement savings. EPF scheme is available to all salaried employees.

In other words, EPF is one type of savings scheme where both the employee and the employer contribute together on a monthly basis. Under this scheme, the contributions made by every single employee from their salary are pooled together and invested by a trust called the Employees' Provident Fund Organisation (EPFO). EPFO is a statutory body of the Government of India formed under the Labour and Employment Ministry. EPFO systematically manages the hard-earned money of all the contributions made to the EPF.

EPF contribution and interest rates in India

The Employee Provident Fund Scheme (EPF) was introduced in 1952, to provide financial security to employees after their retirement. Under this Act, organisations having 20 or more permanent employees working in 180 plus industries should mandatorily register with EPFO. Currently, there are three schemes operational under the EPF Act 1952, which specifies that the employees' contribution towards EPF goes to:

·       Employees' Provident Fund Scheme (EPF) (1952)

·       Employees' Deposit Linked Insurance Scheme (EDLI) (1976)

·       Employees' Pension Scheme (EPS) (1995)

EPF schemes provide economic sustenance to individuals after their retirement or after they leave their jobs due to various reasons. Some of the basic information about EPF is:

  • 12% of the basic salary is deducted from the employee's account (it includes deduction from basic salary plus the dearness allowance)
  • An equal contribution is made by the employer
  • These contributions are done on a monthly basis
  • 3.67% (out of 12%) is contributed by the employers towards EPF while the rest goes towards the EPS and EDLI
  • Interest is calculated monthly while it is credited annually.
  • Interest rates are calculated on accumulated balance on the 1st of April every year.
  • The current rate of interest on EPF is 8.1% in 2021-22.   

EPF Benefits for Employees in India

Employees get several benefits under the EPF scheme, some of which are:

  • Tax exemption on EPF contributions under 80C
  • Tax exemption on interest earned on investments
  • Lump-sum withdrawal at retirement
  • Partial withdrawal for purposes like higher education, marriage and house purchase.
  • Tax exemption on partial withdrawal as well
  • Monthly pension at retirement

EPF provides many benefits and is considered one of the most secured SIPs for employees. For all those who have contributed towards EPF, it is one of the best types of monthly investment. However, for those who are newly employed and do not have any idea about the EPF scheme, it’s always beneficial to open an account and begin contributing to this scheme.

How to create an EPF online account?

Employers can create an EPF account online by registering on the EPFO website. Below are some essential steps for the employer's EPF registration:

1.  Go to section' Establishment Registration'.

2.  A new page will open in the section with 'Instruction Manual' that explains the Employer registration process, followed by DSC registration (Digital Signature Certificate), which is mandatorily required for new applications.

3.  Click on the Accept with a tick box, which reads 'I have read the instruction manual' and further proceed with filling in the details.

4.  Those who have already registered can log in with the Universal Account Number (UAN).

How to create a PF account for the employees?

Employees can open an EPF account by registering on the EPFO website for members. Click on the link EPF e-SEWA/EPF Members Portal, on the right side, you have the option to log in using UAN. However, it is essential that the UAN should be activated before logging in to the EPF members' website.

How can I open the EPF UAN number?

EPF UAN number is a Universal Account Number provided to all the members of EPF. All the members need UAN to log in to the EPF portal. To activate or open EPF UAN, follow the steps given below:

a.  Visit the  EPF e-SEWA/EPF Members Portal.

b.  There will be an option of 'Activate UAN' on the right corner. Click on it

c.   Member, home dashboard will open up, which will ask for details like your UAN/member ID with Aadhar number, name, date of birth, and mobile number as per the EPFO records

2.  Enter the 'Captcha' to get the authorization PIN on your registered mobile number with EPFO

3.  Use the One Time Password (OTP) to validate and activate the UAN online

4.  Another message will be sent on your registered mobile number with EPFO to confirm the online activation of UAN

5.  You can log in to the website once the UAN is activated. You can check your Provident Fund status online.

Is the PF account number and UAN the same?

No, the PF account number and UAN are not the same. PF account number consists of all the information and details of employees' PF transactions with the issuing organisation. At the same time, UAN is the Universal Account Number that consists of all the vital information of all the Member IDs of an employee. UAN is a 12-digit permanent number that remains the same throughout employment. The main objective is to provide a unique identification number to each member and link them to a Single Universal Account. It helps to track the details of individual EPF accounts through unique IDs.

UAN is a permanent number that remains with the member throughout life, whereas the PF number may change when you change the job. However, the PF number will allow you to withdraw the amount linked to the PF account only. Additionally, the UAN will help to withdraw the entire PF amount.

UAN makes the entire withdrawal process easier, whereas the withdrawal and transfer process using the PF number becomes complex.

Summing it up

EPF is a very long-term instrument that works best only if you’re planning for something like retirement as this instrument is geared towards building a retirement corpus. If you have short-term goals then it’s advisable that the contribution towards EPF should be minimal and use the funds for other liquid instruments, knowing what your risk tolerance and time horizon are to achieve those goals.

FAQs

1. Is there any age limit to open an EPF account?

No, there is no age limit for the employees to open an EPF account, but the maximum age limit for becoming an EPF member is 58.

2. Can an employee join EPF directly?

No, members cannot join EPF directly unless they are working in an organisation covered under the EPF & MF Act,1952.

3. Is it possible to withdraw the PF online?

Yes, partial withdrawal for personal expenses like the purchase of property, wedding expenses, or medical expenses is possible. The amount can be withdrawn based on the relevant reasons provided for withdrawal. However, a lock-in period for the partial withdrawal may differ. The amount cannot be withdrawn before five years of service. If this amount is withdrawn before five years, the same amount is not exempted from the tax. There is a 10% tax levied on the amount exceeding ₹50,000 unless the submission of Form 15G and 15H with the Income-tax Department of India.

4. Is there any possibility an employee can opt-out of EPF?

No, there is no possibility of opting out for an eligible member.

5. Can I transfer my EPF account when changing jobs?

Yes, it is possible to track your funds through UAN, as it makes it straightforward to track your PF records at any time.

6. Is EPF withdrawal possible without an employer Signature?

In the past, many employees had faced many problems in getting approval or attestations from their employers. However, EPFO has reviewed this process and made it easy for the employees to withdraw the amount without the employer's attestation or signature. This change occurred after introducing the UAN that requires linking the employee's Aadhar card to UAN to make the withdrawal. The employees can withdraw the PF amount with and without an Aadhar card in the absence of the employer's approval or attestation.

7. What is the Toll-Free number of EPFO?

The toll-free number of EPFO is 1800 118 005 which can be used to update the KYC details or the UAN details of the members.

8. Is an apprentice eligible for the EPF Account?

The apprentice cannot have an EPF account but they can become a member immediately after the completion of their apprenticeship.

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