All about PF (Provident Fund)

Some Frequently Asked Questions on EPF (Employee Provident Fund)
 
 
1. Is it Compulsory for the all the employees to contribute to the Provident Fund?

Yes. Anyone who is an employee of an organization that is registered with the EPFO, has to contribute towards their respective EPF Accounts.

PS: An employer and employee can come to a consensus and opt not to contribute to the EPF if the employee’s salary is above Rs. 6500/- per month. However, the employer would have to convince all other employees to agree to this because the employer cannot opt to contribute the employer portion of EPF to one employee and not do so for the rest. So, technically speaking, it is not compulsory but it is in all practical cases.

2. Can I nominate someone to receive the proceeds of my EPF account? 

Yes. Each member has to make a nomination against their EPF accounts, to receive the amount accumulated under it, in the event of his/her death. Usually it is the spouse/children for married individuals and parents for unmarried people.

3. Can I nominate my brother or sister or any of my in-laws for my EPF Account?

No. Only spouse, children and parents can be nominated as receivers of the proceeds of our EPF accounts.

4. Can I Nominate more than one person? 

Yes. When you nominate multiple individuals, you need to mention the % share each individual must receive. If that is done, the amount will be distributed accordingly.

5. If one does not have any family, what are their options? 

If an individual has no family, he/she can nominate any person or persons of his choice but once they subsequently acquire a family (marriage), such nominations become invalid. The individual has to make fresh nominations of one or more persons belonging to his/her family.

Ex: Let us say Mr. X was brought up in an orphanage and has no family. He finished is studies and joined ABC Private Ltd. as an employee and opened up his EPF Account. As he has no immediate family, he nominated his best friend Mr. Y against his account. After 5 years, X fell in love with Z and eventually married her. As a result, his earlier nomination of Mr. Y will become invalid and he has no choice but to nominate Z as the receiver of his EPF corpus. In future if X and Z have kids, X can include his kids too as nominees.

6. When does an employee become eligible for the employee pension scheme?

For an employee to become eligible for pension fund, he/she completes 10 years of continuous service.

7. Does the 10 years of continuous service refer to – working in the same company? 

No. 10 years of continuous service refers to keeping your EPF Account and EPS Accounts open and active for a period of at least 10 continuous years. Let us say if you switch your job from Company A after completing 7 years of service to Company B, you need to transfer your EPF and EPS accounts to your new job. If you do so, after 3 more years, you will satisfy the 10 continuous years criteria. In case you opt to withdraw your accumulated corpus, you have to start afresh in company B and work for 10 more years to be eligible for EPS.

8. Do contract staff need to open an EPF account? 

No. The EPF account is only for permanent staff of the company. Contract staff, temporary staff and other people who arent on the permanent payroll of the company are not covered by EPF.

9. Can I withdraw my EPF money anytime I want? 

Yes. However, you need to satisfy a few conditions in order to be eligible for withdrawal. Read the article titled Can I Withdraw Money from My Employee Provident Fund (EPF) Account? to learn more about this.

10. Can I withdraw my EPF corpus when I resign from my Job? 

Yes and No. Actually speaking it is illegal to withdraw your entire PF corpus when you switch jobs if you are going to join your new job within 2 months of resigning from your current job. Many people manage to withdraw their PF corpus when they switch jobs and join the new company immediately. Though it is possible, it is actually illegal and has to be avoided.

When you move from one job to another without taking the 2 month break as stipulated by the law, you need to get your PF Account transferred. Read the article titled Can I transfer my PF Account to my new Employer? to learn more about this.

11. Is PF Withdrawal Taxable (In case of withdrawal of the entire corpus)?

Yes and No.

If you are withdrawing your corpus after at least 5 years of continuous service, the amount received is not taxable.
If you are withdrawing your corpus before complete 5 years of continuous service, the amount received is fully taxable. The amount received will be added to your total income for the financial year and taxed according to the prevailing tax slabs.

12. How long does a usual EPF withdrawal take? 

Usually the processing time is around 2-3 weeks but in reality you will receive the money only after around 90 days. The reason is because – your previous employer cannot submit the withdrawal request until 60 days pass after your last date with them. The EPF office takes another 2-3 weeks and eventually you will get the money around the end of the 3rd month.

13. How will I receive my EPF withdrawal money? 

Earlier people used to receive postal orders or demand drafts. These days people are asked to submit their bank details and the money is credited electronically (through ECS)

14. How will I know the current accumulated EPF corpus? 

Most large organizations generate EPF account statements on a regular basis (once a quarter or once a year) and share the same with their employees. One of my old employers in India, had an intranet website where I could login and check my running EPF corpus value on a monthly basis. Alternately you can visit your nearest EPF office and find out your EPF balance by submitting your EPF account number along with your identity proof.

Recently, the EPFO launched a website where people can check their balances online. Please refer to the article titled Breaking News for EPF Account Holders for details on how to check your EPF Account balance online.

15. What is the minimum number of permanent employees an organization must have, in order to open EPF accounts for its employees? 

At least 20.

16. What happens if, a company had more than 20 people and registered with EPFO but at some point in time in future, the number fell below 20? 

Any establishment which has been covered under the Act once shall continue to be governed by the Act even if the number of persons employed by them at any time falls below 20.

17. Are trainee employees covered under the EPF Act? 

Yes, a trainee would be considered as an employee as per the Act but in case the trainee is an apprentice under the Apprentice’s Act then he/she will not be considered as an employee.

18. What are the details I need to know in order to view my EPF Balance online?

You need to know your EPF account number, name (as per in EPF Slip/Statement) in order to use the online facility. First you need to register and then you can view the details.

19. What can I do, if my PF withdrawal or transfer request is stuck and is not getting completed?

The EPF organization has a Grievance Redressal Mechanism in place. You can submit an online complaint and you will get a response within 30 days. Refer to the article ‘EPF Grievance Redressal‘ to learn more about how to get our grievances addressed.

20. Does the EPF organization come under the Right To Information (RTI) Act? 

Yes. All Government organizations, including the EPFO fall under the RTI Act. Refer to the article about EPFO and the RTI Act by clicking here.

21. What would happen if my employer fails to remit the EPF contribution (Both employee and employer share) after deducting it from the employees salary?

Deducting EPF from an employees salary and not remitting it to the EPFO is considered a criminal offense. If found, the regional PF Inspector can even arrest the employer.

22. Could the employer be punished in case the remittance of contribution by him is delayed in a bank or post office?

No. The employer cannot be punished or penalized in case there is a delay in the remittance of the contribution on account of delay in Bank or post office.

23. Can I contribute more than 12% of my Basic Salary as PF? 

Yes, you can. It is called ‘Voluntary Provident Fund or VPF’. Any additional money (beyond the minimum 12%) you wish to accumulate in your EPF Account must be contributed via the VPF scheme. The money will earn the same interest as the EPF contribution and is subject to all rules and regulations that are applicable to EPF. Remember here that, any additional contribution you make will not result in an equivalent contribution from your employer. The employer’s share of PF contribution will be limited to 12%.

24. What is the current prevailing interest rate offered on the PF accumulations?

8.6% compounded on an yearly basis. You can take a look at the Historic Interest Rates Offered on EPF to know how the current rates fare in comparison to history.

If you have any more queries about EPF please feel free to leave a comment in this article and I will be glad to answer them!