We all know what is EPF – Employee Provident Fund. A small
part of your salary (12% of your basic
salary) is invested in something called EPF and an equal
amount is matched by your employer each
month. This is what 95% people know about EPF. But there are
many things in EPF which a lot of
people dont know and this article is going to open some not
known secrets of EPF. One should be
aware about all the EPF related information. So lets take
them one by one in points format.
1: You
can also nominate someone for your EPF
Do you know that there is also “nomination” facility in EPF.
The nominee will be contacted at the
time of death of the person and handed over the EPF money.
However if nomination is not present
(which you should check), it can raise to all sort of issues
while claiming money. There is a form
called Form 2 which has to be filled to change or update the
nomination. Please contact your
company finance department or directly send the form to
EPFO. One very strange rule as per the Act
is that you can’t nominate your brother for EPF. Not sure
why!
2: One
can get pension under EPF
Do you know that there are two elements in EPF- one is
called EPF and other is EPS. The EPF is
actually for your provided fund and EPS is for your pension.
The 12% contribution from your side
goes to EPF, but the 12% contribution which your employer
makes, out of that 8.33% actually goes in
EPS (subject to maximum of Rs 541) and the rest goes into
EPF. So understand it this way, a part of
your employer
contribution actually makes up your pension corpus. But there are some caveats
to
this.
• One is liable for pension only if one has completed the
age of 58.
One is liable for pension only if he has completed 10 yrs of
service (in case of more than one
companies, the EPF should have been transferred, not
withdrawn)
•
• The maximum Pension per month is subject to maximum of Rs
3,250 per month.
Lifelong pension is available to the member and upon his
death members of the family are
entitled for the pension.
•
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3. No
interest is given on EPS (pension part)
You must be thinking that you regularly get compound
interest each year on your contribution +
employer contribution. But it does not work like that. The
compound interest is provided only on EPF
part. The EPS part (8.33% out of 12% contribution from your
employer or Rs 541 what ever is
minimum) does not get any interest. At the time of
withdrawal , you get both EPF and EPS.
4: You
might not get 100% of your EPF money
Imagine your contribution + employer contribution has been
total Rs 3,50,000 till date. Out of this
3,50,000 , suppose 2,50,000 has gone in EPF , and rest
1,00,000 has gone in EPS (for pension) . Now
if you quit your job in 6th year of employment and opt for
withdrawal of your EPF money (EPF +
EPS actually) , then do you think you will get total
3,50,000 . NO !
Thats because you always get 100% of your EPF part, but for
EPS there is separate rule . There is
something called Table ‘D’ , under which its mentioned how
much you get at the time of exit from
your job, there is a slab for each completed year and you
get n times of your last drawn salary
(depending on the completed year of service) subject to
maximum to Rs 6,500 per month. So if your
salary in this case was Rs 30,000 per month, still you will
be given only 6,500 * 6.40 = Rs 41,600.
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5/14/2012Note that the table D is upto 9 yrs only, because if 10 yrs are
crossed, then you are liable for pension.
5: You
can invest more in EPF, its called VPF
You can always invest more than 12% of your basic salary in
EPF which is called VPF. In this case
the excess amount will be invested in EPF and you will keep
on getting the interest, but the employer
is not suppose to match your contribution. He will just
invest upto maximum of 12% of your basic,
not more than that.
6:
Withdrawing of EPF amount at job change is illegal
Almost every one thinks that withdrawing of your EPF amount
after a job switch is totally fine and
allowed, however as per law, it’s illegal. You can only
withdraw your EPF money only if you have
no job at the time of withdrawing EPF and if 2 months have
passed. Only transfer is allowed in case
you get a new job and you switch to it. While there are no
cases where EPF office tracks these things
and takes up this matter, still just for your information
you should know that if you got a new job and
took it and then you are applying for withdrawal, its
illegal as per law. However in case of EPS, if the
service period is less than 10 years, you’ve option to
either withdraw your corpus or get it transferred
by obtaining a ‘Scheme Certificate’. Once, the service
period crosses 10 years, the withdrawal option
ceases.
7: One
can opt out of EPF if he wants
Yes!I know this might be a surprising fact for many , but if
one’s basic salary per month is more than
Rs 6,500, he has an option to opt out of EPF and not be part
of it. In which case he will get all his
salary in hand (without anything deducted every month). But
the sad part is that one has to opt out of
EPF in the start of his job. If a person has been part of
EPF even once in his life, then he cant opt out
of it. So if you have already had EPF in your life. This
option is not for you, but if you are new to job
and your EPF account number still does not exist, you can
tell your employer that you don’t want to
be part of EPF . You will have to fill up form 11 for this.
8: Your
EPF gives you some life insurance too
A lot of people might not know that in case a company is not
providing group life insurance cover to
its employees, in that case the employee is given a small
life cover through EPF. This is because there
is something called Employees’ Deposit Linked Insurance
(EDLI) scheme and your organisation has
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5/14/2012to contribute 0.5% of your monthly basic pay, capped at Rs 6,500, as
premium for your life
cover. However companies which already have life insurance
benefits to employees as part of the
company, are exempted from this EDLI scheme. The bad part of
this EDLI scheme is that the life
cover under this option is very low and that’s maximum
amount of Rs. 60,000. While this is peanuts
for most of the people in big cities. For employees in small
scale industries and small cities, this
amount of Rs 60,000 will still count something.
9: You
can use EPF money can be withdrawn at special occasions
So now you know that EPF withdrawal is not permitted if you
are still working. But there are
occasions when EPF withdrawal is allowed. While you cannot
withdraw it fully, you can withdraw a
partial amount. Following is a list of events when you can
withdraw the EPF amount and the
conditions you need to fulfil
1. Marriage or education of self, children or siblings
- You should have completed a minimum of seven years of
service.
- The maximum amount you can draw is 50% of your
contribution
- You can avail of it three times in your working life.
- You will have to submit the wedding invite or a certified
copy of the fee payable.
2. Medical treatment for Self or family (spouse,
children, dependent parents)
- For major surgical operations or for TB, leprosy,
paralysis, cancer, mental or heart
ailments
- The maximum amount you can draw is 6 times your salar
- You must show proof of hospitalization for one month or
more with leave certificate for
that period from your employer.
3. Repay a housing loan for a house in the name of self,
spouse or owned jointly
- You should have completed at least 10 years of service.
- You are eligible to withdraw an amount that is up to 36
times your wages.
4. Alterations/repairs to an existing home for house in
the name of self, spouse or jointly
- You need a minimum service of five years (10 years for
repairs) after the house was
built/bought.
- You can draw up to 12 times the wages, only once.
5.
Construction or purchase of house or flat/site or plot for self or spouse or
joint
ownership
- You should have completed at least five years of service.
- The maximum amount you can avail of is 36 times your
wages. To buy a site or plot, the
amount is 24 times your salary.
- Can be avail of it just once during the entire service.
10: You
can file an RTI application for EPF issues
Did you know that you can file an RTI applicable to get any
kind of information regarding your EPF.
You can file it if you are facing issues like no clarity
about balance in your EPF, no action taken for
your EPF withdrawal or transfer. To find out information
about other issues on EPF. I have done a
detailed post on how to file an RTI for your EPF issue.
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5/14/2012Update: EPF interest rates are increased to 8.6% for the year 2011-12.
This year just before the
budget it was decreased to 8.25%, but just few days back it
was again raised to 8.6%.
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