epf balance

hidden rules of EPF which not many know

Every employee is asked to provide 12% of their basic salary to the EPF. The same amount of salary is also provided by the organization you are working for to contribute to your retirement funds. For many people across India, EFP balance is one of the most important parts of their savings. To make sure that you get the best protection for your funds and understand where your savings are going, having a perfect knowledge about eh rules of EPF is very important. Basic rules of EPF like the fact that you can get lump sum amount after retirement or the fact that EPF balance is backed by the government is something which everyone knows. But along with this, there are many other popular rules which not many know about EPF. Here are some of such rules:

EPF investment is not compulsory

While making EPF contribution you are never asked. Every time when you join a job, your employer automatically signs you up for investments in EPF. But it should be noted that you have liberty to opt out of the EPF scheme. The government provides you right to invest your retirement fund, anywhere you wish to. These contributions are not mandatory for everyone and you can opt out of it if you follow certain condition. Two opt out of EPF you need to have your basic salary over 15,000 P.M. and also you should have never ever been a member of EPF. If you do not want to put your money in EPF then you will have to state it to your employer right when you get the job so that they do not fill in the EPF membership forms.

Increase your contributions

There are many benefits of investing in PF. It can provide you better interest rates than investing in banks or government bonds. This is also the most secure way to invest as there is almost no risk attached to your money. EPF provides disciplines of investing as the money is directly deducted from your salary. There are also tax exemptions which can provide you benefit under section 80C. Here are some of the things which you should keep in mind for increasing your contribution in EPF.

  • There is a provision by which you can add 100% of your basic salary in EPF.
  • The employer is not required to match your contributions.
  • There is tax exemption on addition contribution to EPF.
  • All rules regarding withdrawal, transfer, and load remain same for EPF account as well.

EPF provides you insurance cover

No many people are aware that EPF can also provide insurance cover to those who are investing. The scheme through which this happens is called as employee deposit linked scheme in which the employer is mandatory to pay an extra 0.5% of the basic salary as the monthly premium. The maximum amount which can be contributed to such scheme is Rs. 75 every month. The cover of insurance is 30 times you monthly salary which is capped at 15,000. Along with this, there is a bonus of Rs. 1.5 Lakhs which is also provided to the employees. In terms of the stats, the maximum insurance provided by EPF is 6 lakhs. The employer also has the option to provide group insurance from a private insurer.

EPF withdrawals are taxable

We all know that Investments which are made in epf balance are tax-free and so are the interest and maturity amount. But what we do not know is that there are few conditions which are applied to it. Tax benefits which are provided from EPF are subject to condition. You can enjoy the tax benefit for the first year of your investment but like any other investment, there is a 5-year lock-in period. If you want to withdraw your EPF balance before completion of 5 years then you would have to pay the tax benefit which you have availed.

No need to transfer your EPF balance

Transfer of EPF balance was not an easy task before. Thankfully it has now become an online process which can transfer the amount easily. Transferring using UAN will not require you to put any application form as EPF transfer with the help of UAN will be carried out automatically. According to new system UAN as well EPF accounts are linked in together. EPFO will transfer the PF balance of all the old PF account to the current account and you will not have to provide any application.

Employer cannot withhold your money

After providing your resignation, the notice period is the most difficult time. Many times the employee will leave the company in rush and not even serve the notice period. Most of the times in such situations, EPF balance is one thing by which the employer can twist the arm of the employee. Some of the employers also go to the extent of never forwarding the PF withdrawal form to the PF office. Rules here are very simple, as employers do not have any right to withhold your PF withdrawal request. Money never remains with the employer as employees are the only facilitator of the EPS scheme. It should also be noted that to withdraw the amount from your EPF account you do not require the signature of your employer. All the authentication of the application is done from your bank manager and you can get your PF amount without any kind of interference.

Immediate withdrawal of EPF

In normal conditions, EPF balance withdrawal is not possible directly after you leave your job. You need to wait for 2 months after leaving the job for the purpose of withdrawals. However, if you require withdrawing the money urgently then there are certain provisions which can provide you such liberty. Here are few conditions by which you can withdraw your EPF balance urgently:

  • If the employee is dead
  • If the employee is shifting to any other country
  • Employee is leaving the job for child’s birth

You cannot get 100% EPF Corpus before your retirement age

There is a provision to withdraw EPF amount if you are unemployed for 2 months. But it should be noted that this withdrawal is not for complete amount. As per the new rule in the EPF withdrawals, you get to withdraw only your contribution and can secure interest on it.