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Employee Provident Fund – All You Need to Know

The Employee Provident Fund (EPF) is a social security scheme implemented in many countries, including India, to provide financial security and retirement benefits to employees. In India, the EPF scheme is governed by the Employees’ Provident Funds and Miscellaneous  Provisions Act, of 1952.

The EPF is a mandatory savings scheme for employees working in specific industries and organizations. Both the employer and the employee contribute a certain percentage of the employee’s salary to the EPF account. The primary purpose of the EPF is to help employees save a portion of their earnings during their working years so that they have a financial cushion after retirement.

What is the Employees’ Provident Fund Organisation? 

Employees’ Provident Fund Organisation is a statutory body of the Government of India, operating under the Ministry of Labour and Employment. EPFO is responsible for administering and managing the Employees’ Provident Fund (EPF), a social security scheme for employees working in the organized sector in India.

The Employment Provident Fund (EPF) scheme was introduced in 1952 to provide financial security and retirement benefits to employees. Under this scheme, both the employer and the employee contribute a certain percentage of the employee’s basic salary and dearness allowance to the EPF account. The contributions are made monthly, and the current contribution rate is fixed at 12% of the employee’s basic wages and dearness allowance.

How to apply for Employee Provident Fund in India for Employers?

  • Steps to register for Employee Provident Fund – 

Step 1 – Visit the EPFO (Employment Provident Fund Organisation) website and click on the “Establishment Registration” button on the homepage.

Step 2 – Then, register yourself on USSP (Unified Shram Suvidha Portal) where the sign-up page will appear. Click on the “Sign Up” button.

Step 3 – After creating an account on the USSP, log in to the USSP and then select the “Registration for EPFO-ESIC” button on the left-hand side of the screen. After that, you need to select the “Apply for new registration” button on the right side of the screen.

Step 4 – The next step is to fill out the registration form where after clicking the “Submit” button, the “Registration Form for EPFO” page will open. Here, fill in the “Establishment Details” section and then click on the “Next” button.

Step 5 – After filling up all the necessary information, click on the “Digital Signature” button on the next page and attach the Digital Signature Certificate. After your DSC is uploaded, you will receive a successful completion of registration form message with an email from the United Shram Suvidha Platform.

  • Documents required for Employee Provident Fund Registration – 

  1. PAN Card of the Partner/Proprietor/Director.
  2. Aadhar Card of the Partner/Proprietor/Director.
  3. Proof of address of the Registered Office such as the Water Bill, Telephone Bill, or Electricity Bill which shouldn’t be older than 2 months.
  4. GST Certificate / Establishment and Shop Certificate / any license issued by the government for the establishment.
  5. Rented / Hired / Leased Agreement, if any.
  6. Bank Statement of Entity or Canceled Cheque.
  7. Digital Signature of the Partner/Proprietor/Director.
  8. License Proof issued by the Licensing Authority or Identifier. 

Benefits of Employee Provident Fund – 

  • For Employees: 

  1. Retirement Savings: The employment Provident Fund serves as a long-term retirement savings scheme. Throughout their employment, employees and their employers contribute a portion of the employee’s salary to the EPF account, building up a significant corpus over time. This helps employees maintain financial security during their retirement years.
  2. Financial Security: The Employment Provident Fund offers financial security to employees and their families in case of emergencies or unexpected events such as medical emergencies, disability, or unemployment. Partial withdrawals and loans are permitted under specific circumstances, ensuring a safety net for employees.
  3. Tax Benefits: Contributions to Employment Provident Fund are eligible for tax deductions in many countries, helping employees save on income tax. Additionally, the interest earned on the EPF corpus is often tax-exempt, making it a tax-efficient investment option.
  4. Low-Risk Investment: Employment Provident Fund is considered a low-risk investment since the funds are managed and overseen by government agencies or trusted financial institutions. The focus is typically on preserving the principal and providing a steady return rather than chasing high-risk, high-return investments.
  5. Employee-Employer Contribution: Both employees and employers contribute to the Employment Provident Fund account, which means the burden of saving for retirement is shared. Employers are required to contribute a certain percentage of the employee’s salary to the Employee Provident Fund, ensuring that employees receive additional financial support for their retirement.
  • For Employers: 

  1. Employee Retention and Attraction: Offering EPF benefits can be an attractive factor for potential employees and can enhance employee retention. It reflects positively on the company’s commitment to the welfare of its workforce.
  2. Statutory Requirement: In many countries, employers are mandated by law to contribute to their employees’ EPF accounts. Adhering to this requirement ensures compliance with labor laws and avoids potential legal issues.
  3. Social Responsibility: Providing EPF benefits showcases the employer’s social responsibility and concern for the long-term financial well-being of their employees.
  4. Employee Morale: Knowing that their employer is actively contributing to their retirement savings can boost employee morale and satisfaction, leading to a more productive and loyal workforce.

Frequently asked questions  about Employment Provident Fund: 

(1) How to claim a dormant Employee Provident Fund account?

A dormant account can be a tricky affair because not only it eliminates the potential use that you can make from the cash, but also forces your cash to get held up. 

If you have an unclaimed account, the following are the steps to liquidate it immediately – 

  1. Log in to the link.
  2. Then select the “For Employees” section and under that click on ‘Inoperative A/c Helpdesk.
  3. On this page, select the option ‘(a) First Time User Click Here to Proceed’. 
  4. Describe in the ‘Problem Description’  Section why your account has been inoperative once the next section arrives.
  5. After that, you will have to provide some necessary documents like EPF no., Company name then you’ll have to enter your KYC details. Aadhar card, Bank Account number, IFSC code, and PAN number.
  6. Then you’ll have to generate your pin by entering the pin that will be sent to your mobile and then verify it and submit. 
  7. After that, you’ll receive an ‘Acknowledgement’ on your screen. Further, you can log in as a registered member and check the status of your application.

(2) Why Employee Provident Fund shouldn’t be withdrawn before 5 years?

Withdrawing the Employee Provident Fund (EPF) before completing 5 years of continuous service can have several disadvantages and is generally not advisable due to the following reasons:

  1. Tax implications: If you withdraw your EPF balance before completing 5 years of continuous service, the amount will be subject to taxation. The EPF withdrawal becomes taxable under income tax laws, and the tax liability is calculated based on your income tax slab at the time of withdrawal. On the other hand, if you complete 5 years of continuous service, the withdrawal becomes tax-free.
  2. Loss of interest: The EPF provides a guaranteed rate of interest, which is usually higher than many other traditional savings options. Withdrawing before 5 years means you’ll lose out on the potential growth of your funds due to the interest accrued.
  3. Compounding benefits: The power of compounding works best over the long term. By prematurely withdrawing your EPF, you miss out on the opportunity for your contributions to grow exponentially over time.
  4. Retirement savings impact: The primary purpose of the EPF is to serve as a retirement savings fund. Withdrawing the money early can leave you with insufficient savings during your retirement years.
  5. Emergency fund depletion: EPF should not be considered an emergency fund. If you withdraw your EPF prematurely for non-essential expenses, you may face financial difficulties in case of actual emergencies.
  6. Penalties: Some countries impose penalties for early withdrawal, further reducing the amount you receive upon withdrawal.

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