Employee Provident Fund Compare

Additional Useful Information

• The minimum contribution by male employees to the EPF account is 12% of their basic salary. A 10% contribution is also permissible in some industries. The minimum contribution by the employer will remain at 10% or 12% depending upon the contribution of the employee.

• The minimum contribution by female employees to the EPF account is 8% of their basic salary for the first 3 years. After that, the contribution rises to 10% or 12%. The minimum contribution by the employer will remain at 12%.

• The contribution by the employer is split into two parts. Of the 12% contributed, 8.33% goes towards the Employees’ Pension Scheme (EPS). The remaining 3.67% goes towards the Employees’ Provident Fund. Over and above this, an additional contribution of 0.5% is made towards the Employees Deposit Linked Insurance Scheme.

• Here is an example to further understand this:
• Employee Salary = ₹30,000 per month
• Employee contribution towards EPF = 12% of ₹30,000 = ₹3,600
• Total Employer contribution = 12% of ₹30,000 = ₹3,600
• Employer contribution towards EPF = 3.67% of ₹30,000 = ₹1,101
• Employer contribution towards EPS = 8.33% of ₹15,000 (Because the maximum contribution allowed by an employer towards EPS is 8.33% of a ceiling amount of ₹15,000) = ₹1,250
• Employer remaining contribution towards EPF = ₹3,600 – (1101 + 1250) = ₹1,249

• EPF matures when the employee turns 58 years old.

• EPF account can be opened at any age. There is no age restriction.

• Withdrawal terms are as follows:
• Premature Exit/Closure/Withdrawal:
• Unemployment – If the employee has been unemployed for a month, up to 75% of the corpus can be withdrawn. If the unemployment tenure stretches to 2 months, the remaining 25% can be withdrawn.
• Education – Up to 50% of the EMPLOYEE’S CONTRIBUTION can be withdrawn to pay for the higher education of the child after class 10^th. However, this is only permissible after contributing to the EPF for a minimum of 7 years.
• Marriage - Up to 50% of the EMPLOYEE’S CONTRIBUTION can be withdrawn to pay for the marriage of the employee, his/her children or brother/sister. However, this is only permissible after contributing to the EPF for a minimum of 7 years.
• Specially – abled Individuals – They can withdraw 6 months of basic wage + dearness pays to pay for equipment cost.
• Medical Emergencies – Employees can withdraw 6 months of basic wage + dearness pay to pay for urgent medical emergencies. This includes immediate family members as well.
• Home Loans – 36 months of basic wage + dearness pay can be withdrawn for repayment of home loan. However, a minimum of 10 years of EPF contribution is required to be eligible for this.

• At Maturity:
• The contribution made towards the EPS is paid out as pension to the employee thereafter and that cannot be withdrawn as a lumpsum. The remaining corpus can be withdrawn as a lumpsum.

Returns *

• EPF generates 8.25% returns yearly.

• The Government of India decides the interest rate for the EPF Scheme.

• Since the interest is guaranteed and backed by the Government of India, EPF is one of the safest and most popular investment schemes.

Risk Level

• EPF is a risk-free scheme since interest is guaranteed and the scheme is backed by the Government of India.

• However, since the scheme is risk free, it may not offer returns offered by other traditional investment classes such as bonds, NCDs, equity, etc.

Liquidity

• Premature Exits are conditional making EPF an illiquid scheme.

• Investors can look at ‘additional useful information’ to know more about the withdrawal terms.

Interesting Facts

• The investment in this scheme can be pledged as collateral for loans subject to terms and conditions of the lending institution.

• If the employee becomes self employed or moves to a smaller firm that is not eligible for EPF, the EPF account of the employee will stop earning interest after 3 years.

• Interest rates are updated yearly by the government.

Tax Implications

• If the contribution by the employee in an EPF account is more than ₹2,50,000 in a given financial year, the interest received on that amount is taxable as per the income slab of the investor. Any contribution amount below that, interest earnt is tax free.

• If the contribution by the Government employees where there is no employer contribution, in an EPF account is more than ₹5,00,000 in a given financial year, the interest received on that amount is taxable as per the income slab of the investor. Any contribution amount below that, interest earnt is tax free.

• In addition, employers' contributions to superannuation, EPF, and NPS accounts that exceed ₹7,50,000 would be subject to employee taxation.

• Any withdrawals made after 5 years of continuous service are tax free.

• Any amount received at maturity is tax free if the 5-year continuous service criteria is fulfilled.

• Under section 80C of the Income Tax Act, investors are eligible for a maximum tax deduction of ₹1,50,000. Investing in EPF can be done to claim the deduction.

Where To Invest

• https://unifiedportal-emp.epfindia.gov.in/epfo/