EPF is a retirement benefits scheme meant for salaried employees and managed by the government. The USP of this scheme is the rate of interest which is higher than most of the small savings instruments. However, the recession caused by the pandemic is hitting the working class very hard. If you are a salaried individual, you must have an EPF account opened by your organization. But do you know there are many little things we do not know about our UAN EPFO account? For example, when one can withdraw the money? Where do our contributions go to? We have rounded up such questions and more that we think every salaried person should know to manage their account via a unified member portal better.
1. Know how much you contribute to the scheme:
The salaried employees must contribute a portion of their salary to the EPF. As per the provision, an employee contributes 12% of their basic salary plus DA. The employer also contributes an equal amount. If an employee wants to, they can make an additional contribution through the Voluntary Provident Fund (VPF), but in that case, an employer isn’t liable to match the same amount as you do. In case you do contribute voluntary, the same will be shown in a different header which you can see in your passbook by downloading it from the unified member portal.
2. Tax Implication:
The USP of investing in the EPF is it has exempt-exempt-exempt tax status. That is, it is exempted from tax on the contribution made up to Rs. 1.50 under section 80 C, at the time of maturity, and interest received on your EPF contributions are further exempted from tax as well. However, the benefit is only applicable after five years. That is, any amount withdrawn before the completion of 5 years is treated as income and will be taxed in India as per the individual’s income tax slab. However, a salaried employee should know when EPF can become taxable. Effective from April 1, 2021, onwards, if an employee’s own contribution to the EPF account (including voluntary provident fund (VPF) exceeds 2.5 lakh in a financial year, then the interest earned on excess contribution will be taxable. Hence, check contributions made to your UAN EPFO account from time to time.
3. Understand how to read the PF statement:
It is no surprise that many employees don’t check their UAN EPFO statement often, which can lead them to overlook any discrepancy made by the authority if any. EPF contribution is a part of your monthly salary. Hence, you should look at it every once in a while. You can get a copy of your PF statement from the unified member portal. The statement carries your basic details, opening balance representing the total contributions made by the employee and employer plus the interest earned in the previous financial year, withdrawals if made any, and closing balance which will become the opening balance for the next financial year.
4. The breakup of EPF contribution you make:
As per the regulations, both employees and employers contribute 12% of the basic monthly salary to the EPF. If the establishment has less than 20 employees, then the amount is restricted to 10%. The contribution made can be checked by logging into the UAN member portal. As a salaried individual, you should know where the amount of your monthly contribution showing under UAN EPFO goes to. Remember, the employer’s contribution will not entirely go towards the investment fund. Rather, it goes towards these different schemes. Currently, it is under these trusts that your monthly contributions go to:
- Employees Provident Fund Scheme, 1952
- Employees Deposit Linked Insurance Scheme, 1976
- Employee Pensions Scheme, 1995
5. EPF balance is withdrawable under SPECIFIC occasions:
Technically, EPF Balance is not withdrawable while you are still working with an organization, but it can be withdrawn on a few occasions to meet specific expenses such as Marriage, Education of your child, Repayment of home loan, Construction or purchase of a house, Medical treatment, etc. However, it is the portion you can withdraw which is different in each of these events. Moreover, the eligibility varies from condition to condition as well.
6. Keep your UAN EPFO login details saved in your mobile for easy access:
When an organization opens an EPF account, the employee is given a UAN or Unique Account number. With the help of this number in India, you can log in through a unified member portal and track and monitor your account online. S/he can avail of different services EPFO offers. UAN number provides an ease of operation, especially when you are changing an organization; you just have to provide the number to the new employer, and through this, the funds will be transferred to the new employer, and the contribution will continue as usual.
7. Can withdraw money for coronavirus emergencies:
Back in 2020, the government announced that an individual could withdraw a certain sum from their EPF if they are facing a financial crunch due to coronavirus induced. As per the rules, a member can withdraw an amount equal to 3 months of basic salary and dearness allowance or 75% of the credit balance in the account, whichever is lower. To apply for a claim online, a member should have an activated UAN, an Aadhar number linked with UAN, and lastly, a bank account number should be seeded with UAN. After that, log in to your UAN member portal, fill the Form 31, and select the reason ‘outbreak of covid pandemic’ as the reason for withdrawing. According to the rules, the money withdrawn from your EPF account during this time is not taxable.
For a salaried individual, contributions to the EPF offers a lot of benefits; safe returns, help you accumulate a significant corpus for your retirement, E-E-E tax treatment, higher interest rate compared to other saving schemes, can avail loan against EPF in case of emergency, withdrawals being allowed under specific conditions. However, keep in mind. EPF in India is considered to be a long-term investment. If you have short-term financial goals, do not withdraw from your EPF to fund them. Secondly, make sure your UAN details are up to date as it can lead to the rejection of your claim.