EPF and EPS in India

Employees’ Provident Fund Scheme

(1952)

Prepared By

Ashi Anjum

accelerate your ambition

Under EPF Scheme 195611th April 2014

accelerate your ambition 3

A compulsory, government-managed retirement benefit scheme available to all salaried

employees.

It is mandatory for every employee drawing a basic pay of up to Rs. 6,500 per month to

make contribution towards EPF & EPS. However, employees drawing basic salary

over Rs. 6,501per month have an option to get PF deducted from their salary.

Both employees and the employer contribute to PF at the ‘rate of 12%’ of the basic wages

and dearness allowance (if any) per month. Thus, the total contribution to PF is 24% per

month.

What is Employee Provident Fund???


The entire 12% of employee’s contribution is added towards EPF, while 8.33% out of the

total 12% of the employer’s contribution is diverted to the EPS or pension scheme and the

balance 3.67% is invested in EPF.

However, if the basic pay of an employee exceeds Rs. 6,500 per month, the contribution

towards pension scheme is restricted to 8.33% of Rs. 6,500 (i.e. Rs. 541 per month) and the

balance of employer’s contribution goes into EPF.

Thus, the employer contributes only up to Rs. 541 per month (8.33% of Rs. 6,500 in the

employee’s pension scheme account

Contribution – Employer & Employee


Contribution Matrix

Scheme Employee’s contribution of

basic pay

Employer’s

contribution

EPF 12% 3.67%

EPS — 8.33%

Subject to Maximum

541 Rs. PM Balance will

go to Employer’s PF

Contribution


Contribution Calculation

YearMonthly basic

(Rs.)

Employee’s Monthly PF

Contribution @ 12% of

Basic

Employer’s Monthly

PF Contribution

Employer Monthly

EPS Contribution

(Rs.) @ 8.33%

(Subject to max. 541

PM)

1 6500 780 239 541 541

2 8000 960 419 541 569

3 10,000 1,200 659 541 597

4 13,000 1,560 1,019 541 627

5 15,000 1,800 1,259 541 658


An option wherein a person can contribute more than the normal compulsory deduction of

12% of your basic salary. Where you are allowed to contribute 100% of your basic salary in

VPF.

This additional amount enjoys all the benefits of PF except that the employer is not liable to

contribute any extra amount apart from 12%. An added advantage is that the interest rate is

equal to the interest rate of PF and the withdrawal is tax free.

You just need to fill a Joint declaration form and submit the same to your HR.

Voluntary Provident Fund (VPF)


Interest on EPF

The EPF interest rate is decided by the central government with the consultation of Central

Board of Trustees.

The EPF interest rate notification is available on the official website of EPF India on an annual

basis.

For FY13-14, the interest calculated on EPF is 8.75%.


As soon as you join your new organization you are allotted a new PF account number, which

is an alphanumeric digit.

For Example – MH / BAN / 43447 / 1112

The first two letters indicate the state code, Like MH stands for Maharashtra. Which is in

charge of your account.

The next three letters indicates the regional PF office code, Like BAN stands for Bandra.

The next five digits are the employer’s code, followed by the employee’s code.

How the process starts…


Someone whom you want to be the recipient of benefits after

y your Death.

Nomination


In the case of a male member – His wife, his children whether married or unmarried, his

dependent parents and his deceased son’s widow or children.

In the case of a female member – Her husband, her children whether married or unmarried,

her dependent parents her husband’s dependent parents and her deceased sons’ widow or

children.

If any of the above relations is in existence then the employee can not make anybody

else his nominee for his Provident Fund. But if none of them exists then He can

nominate anyone whom he wants to.

Definition of the “FAMILY” for the purpose of Employees’ P F Scheme.

Nomination


*Wife in the case of male member;

*Husband in the case of a female member;

*Sons (Up to 18 Years of Age) and Unmarried daughters (Up to 25 Years of Age) of a

member.

Bachelor and childless widower can nominate their dependent parents only. However, upon

getting married, he will make a fresh nomination in form 2.

(For Pension - Only spouse & children if married, & Parents if Unmarried)

Definition of the “FAMILY” for the purpose of Employees’ Pension Scheme.


Advances / Withdrawals While in Service

EPF withdrawal is not permitted if you are still working.

But Like any other financial product, you can withdraw balance

from your EPF account upon emergency.

Advance/ Withdrawals may be availed for the following purposes :

1- Marriage / Education

2- Treatment

3- Purchase or construction of Dwelling house

4- Repayment of Housing Loan

5- Purchase of Plot

6- Addition/Alteration of House

7- Repair of House

8- Lockout

9- Withdrawal Prior to Retirement

For Marriage / Education

Type of Advance Purpose EligibilityMaximum Admissible

Amount**

Proof/ documents

required

Under Para 68-k of the

Scheme

For the marriage of:

1. Self

2. Son, Daughter

3. Brother, Sister

For education of :

o Self

o Son,

o Daughter

Should complete

at least 7 years of

service.

3 times in the entire

service

50% of Employee share

at the time of tendering

the application

Apply in Form-31

through the Employer

Bonafide Certificate duly

indicating the fees

payable from the

educational institution

Marriage invitation card

along with the

application should be

submitted through the

employer

For Treatment

Type of Advance For the treatment of EligibilityMaximum Admissible

Amount**

Proof/ documents

required

Under Para 68-j of the

Scheme

Whenever required for

treatment

1- Self

2- Family

(spouse, son, daughter,

dependent father, mother)

Major surgical

operation in a

hospital

Suffering from TB,

leprosy, paralysis,

cancer, Mental

derangement or heart

ailment

and having been

granted leave by his

employer for the

treatment of said

illness

No minimum service

required.

6 times of Wages

OR

Full of Employee share

(whichever is less)

Form-31 through the

Employer.

Certificate from ESI or from

Employer that the ESI facility

is not available to the

member.

A doctor (or registered

medical practitioner) of the

hospital certifies that a

surgical operation or

hospitalization for 1 month or

more is/was necessary.

In case of TB, leprosy ...etc.,

a specialist doctor should

certify

For The Construction/ purchase of (House/ Flat)


Amount**

Proof/ documents

required

Under Para 68-B of the

Scheme

Only Once (either

'construction or

purchase of house' or

'repayment of housing

loan)

For the construction/

purchase of dwelling unit

(house/ flat)

Should complete 5 Years

of service

Only once in service

Property should be in the

name of self or spouse

or jointly

Should not be a joint

property owned by other

than the spouse

36 times of Wages Declaration in the

Proforma obtained along

with application signed

by Member

Apply in Form-31

through Employer

Repayment of Housing Loan


Amount**

Proof/ documents

required

Under Para 68-BB of

the Scheme

Only Once (either

'construction or

purchase of house' or

'repayment of housing

loan)

Repayment of housing

loan

Should complete 10

Years of service



name of self or spouse or

jointly



than spouse

36 times of Wages Declaration in the

Proforma obtained with

approval and signed by

the Member

Apply in Form-31 through

the Employer

For The Purchase of Site/ Plot


Amount**

Proof/ documents

required

Under Para 68-B of the

Scheme

For the purchase of site/

plot


of service


property should be

registered in the name of

self or jointly with

spouse

should not be a joint


than spouse

24 times of Wages Filled-up

Declaration(from the

Employee in the

prescribed form and

enclosed with the

application.

Copy of the Purchase

Agreement


the Employer

Addition/Alteration of House


Amount**Proof/ documents required

Under Para 68-B(7) of the

Scheme

Addition/alteration of

house

(same type of advance

can be availed for repair

of house)


after construction



name of self or spouse or

jointly



than spouse

12 times of Wages Certificates of proof


the Employer

Annexure III

(construction /

completion certificate/

utilization certificate)

should be submitted

Withdrawal Prior to Retirement


Amount**

Proof/ documents

required

Under Para 68-NN of

the Scheme

Only once

Withdrawal prior to

retirement

No minimum service

At least 54 years of age

1 year before retirement

(54)

90% of total of both

shares

Certificate from the

employer showing the

date of retirement

Apply in Form-31


*As Advance facility is not a “LOAN”, employee do not have to refund the

said amount back to the PF Department and do not have to pay any

interest on the same.


PF Withdrawal on Change of Job

PF Withdrawal Process.

2 Months Waiting Period - The rules are that an employee should not be in employment for two months

after resigning if he has to withdraw his P.F amount.

Form 19 (for EPF withdrawal) http://www.epfindia.gov.in/downloads_forms.html

Form 10c (for EPS withdrawal) http://www.epfindia.gov.in/downloads_forms.html

A blank cancelled cheque (this is required to verify accuracy of MICR Code Number). The

cheque should be of you as a single account holder and not a joint account.

Form is submitted to the regional PF office after which the said amount along with interest

would be deposited in your bank account within a period of 90 days.

http://www.epfindia.gov.in/downloads_forms.html

http://www.epfindia.gov.in/downloads_forms.html

Know Your Claim Status Online.

http://www.EPFIndia.com/ClaimStatus_New.html

Step 1 - First you will see a page having title “Claim Status Information”, from where you have to Select

PF Office State for example "DELHI".

Step 2 - Just after select Delhi as state you will see three offices namely Delhi North, Delhi South etc.

Step 3 - If you know the EPF Office from where your claim has to be settled, select the same from the list.

Step 4 - On selection of office, the mandatory Region Code and Office Code will get populated

automatically in the respective boxes.

Step 5 - Enter the Establishment Code in the third box – which can be of maximum 7 digits.

Step 6 - In case the Establishment Code has an extension / sub-code, enter the same in the forth box. It

can be a digit or letter as the case may be and can be of maximum 3 characters in size. Leave this field

blank, if there is no extension /sub-code to the Establishment Code.

Step 7 - Enter your account number in the fifth box which can be of maximum 7 digits.

Step 8 - Click on submit to get the status.

http://www.epfindia.com/ClaimStatus_New.html


PF Transfer


1. While you need to wait for two months to withdraw the money, the transfer takes place immediately.

2. EPF is currently offering 8.75% of interest, which is not taxable. Hence, it is best to stay invested in.

3. According to the new rules, after year 2011, after 3 years of inactivity, your PF account will stop earning

any interest income.

Why to transfer PF Account.

PF Transfer Process.

1. Fill up PF withdrawal form (Form 13) with the details of your previous organization, including your

previous PF number, previous employer and regional provident fund office details.

2. Sign and hand over the Form ‘13’ in triplicate to your present employer/HR Department.

3. HR will fill in the details of your current organization and attested it by the authorized signatory (of the

new employer).

4. HR then submit it to the regional PF office for transfer.

5. The regional PF office then gets in touch with your previous employer / regional PF office to affect the

transfer.

Ideally, the process should take around 30 days.


EPFO introduces a

new system to

facilitate online

submission of transfer

claims by Members

with an objective to

make the transfer

process transparent,

efficient and

comfortable for you.

http://epfindia.nic.in/Employee_OTCP.html

http://epfindia.nic.in/Employee_OTCP.html


http://www.epfindia.com/MembBal.html

Instead of providing hard copy of the Annual PF slips, EPFO has launched the e-passbook

facility for EPF subscribers—which will include their updated PF account status online.

Can be downloaded multiple times in a month.

Link to register for e-Passbook.

http://members.epfoservices.in/index.php

After 3 working days you’ll be able to download your e-passbook.

Check your EPF Balance

http://www.epfindia.com/MembBal.html

http://members.epfoservices.in/index.php


Employee Pension Scheme 1995

Employee Pension Scheme.

Employees contributing to EPF Scheme automatically become member of Employees’ Pension Scheme

without contributing single penny and can enjoy all the benefits available under the Employees’ Pension

Scheme.

Monthly Pension facility is available on completion of age of superannuation for the employees

completing 10 years of membership towards EPS

In case of death of the member, nominee can claim the entire funds lying in the account of the deceased

together with interest.

EPS being a pension scheme, interest is not applicable. Hence, no interest is earned on the

amount accumulated in EPS.

Maximum Pension

Under EPS, the monthly pension is decided on the basis of ‘pensionable service’ and ‘pensionable

salary’.

The formula to calculate pension is:

Monthly pension = (Pensionable salary X Pensionable service) ÷ 70

Employer shows your salary as Rs. 6,500 for EPS, so the pension is calculated on a monthly salary

of Rs. 6,500. So if you have worked for say 35 years, your monthly pension will come to Rs. 3250

According to the formula - [(Rs. 6,500 X 35 years)] ÷ 70

Thus, the maximum pension per month is subject to maximum of Rs. 3,250 per month.

Receiving Pension

If you have attained the age of 50 years or more and

If you have completed a total service of 10 years or more and

If you are not getting any other EPF Pension.

However, no pension is payable before the age of 50 years. Early pension—that is an employee receiving

after completing 50 years of age but before 58 years—is subject to reducing factor @ 4% (from

September 2008) for every year falling short of 58 years. In case of death / disablement, the above

restriction is not applicable.

The pension amount is payable to the eligible subscriber till he survives. On the death of the employee,

members of his family—whom he has nominated—are entitled for the pension.

EPS Withdrawal Benefit

Return of contribution on exit from the

employment

Year of serviceProportion of wages at

Exit

1 1.02

2 1.99

3 2.98

4 3.99

5 5.02

6 6.07

7 7.13

8 8.22

9 9.33

For Example:

An employee exits from employment

after four years of service his wage

on exit is Rs. 6500

(Return of contribution will

be Rs. 6500 x 3.99 of wages on exit)

i.e.,Rs. 25935.

“To withdraw from EPS, an employee

needs to contribute at least for six

months”


Gratuity – Reward Money

Gratuity shall be payable to an “employee” on the termination of his employment after he has rendered

continuous service for not less than five years.

a. On his superannuation.

b. On his retirement or resignation.

c. On his death or disablement due to accident or disease.

NOTE: However, the condition of five years of continuous service is not necessary if service is terminated

due to death or disablement.

Calculation - Gratuity

* Salary = basic + DA

*Completed year of service means:

*Full time service of more than 240 days in a year is considered as 1 completed year of service.

*Here, number of days in a month is considered as 26.

*Gratuity is calculated at the rate of 15 days salary (means basic salary + DA, if any) for every completed year of service

Therefore, 15 days’ salary is arrived as = salary * 15/26

Gratuity = Monthly Salary x 15 x No. of years of service

26

Here is a link where you can calculate your Gratuity online

http://easycalculation.com/finance/gratuity-calculation-india.php

http://easycalculation.com/finance/gratuity-calculation-india.php

Calculation - Gratuity

Employer contribute at a rate of 4.81% from the basic salary of the employee.

Since receivable Gratuity = 15/26*( Nor. of Years of Service)

Rate of Gratuity per month = 15/26*1/12 % = 4.81%

Example :

If an employee is drawing 54000 Rs of Basic formula would be-

54000 x 15 x 1 Year = 31154

26 OR 54000 x 4.81% = 31164

Facts

Calculating completed years of service , if an employee worked for more than 6 months , it will be

considered as full year .

Example : Employee worked for 14 years and 7 month , then completed years of service = 15 years

Example: Employee worked for 14 years and 5 months ,then completed years of service = 14 years

Example: Employee worked for 14 years and 6 months, then completed years of service = 14 years

In case gratuity is received from more than one employer during the previous year, maximum

exemption allowed is up to Rs 10,00,000.

Maximum Amount of Gratuity

The amount of gratuity cannot exceed Rs 10,00,000 (10 lacs) . Even if it exceeds , maximum amount

payable by employer shall be Rs 10,00,000

Recruiting & HR

EPF and EPS in India