Employees Provident Fund (EPF) Scheme

Updated on Jul 30, 2020

Overview

EPF or Employee Provident Fund is a retirement saving scheme. That is, you save money in this account for the days of retirement. As soon as you get a job, saving for your retirement starts through this scheme. The Employees Provident Fund Organization also provides life insurance facility to its subscribers or member employees. All subscribers of EPFO ​​are covered under Insurance Scheme 1976. The amount of the insurance cover is 20 times the EPFO ​​member implants' wage, which is up to a maximum of Rs 6 lakh.

The EDLI or Employees Deposit Linked Insurance scheme can be claimed on behalf of the nominee of the Member Employee by the Employee in case of illness, accident or natural death. Now, this benefit will also be given to the aggrieved family of employees who has worked in more than one establishment within 12 months immediately before death. There is a lump sum payment. Employees do not have to pay any amount in EDLI.

Background

If you work in a private company, then you have to deposit money in the EPF scheme. This is government law. Government employees do not invest money in it as there is a separate GPF scheme for them. Or they invest in the National Pension Scheme.

However, an excellent condition has to be fulfilled to stay out of the PF scheme. And this condition is a basic salary of more than INR 15,000. There will be very few people who get more than 15 thousand basic wages in the beginning. Because nowadays the basic wage is much less than the Employee's CTC salary. And by the time the new Employee comes to know about the PF, his company has opened PF account in his name without asking. That is why generally all employees of private companies are part of this scheme.

Features of the Scheme

Company contribution

The 12% of the Employee Provident Fund of basic salary + DA of employees working in the organized sector goes to EPF. The company or employer also contributes 12%. Out of the employer's 12% contribution, 8.33% of the Employee Pension Scheme goes to EPS and the rest to EPF.

But, apart from this, there is some contribution from the employer. Employees do not have to make any kind of contribution to the EDLI scheme. The company collects the premium in exchange for the Employee. The premium amount is 0.50 per cent of the Employee's basic salary and dearness allowance. However, the maximum basic salary limit will be 15 thousand rupees only.

For employers

Deposit of money in EPF account is not only mandatory for you. It is also compulsory for your employer. As per rules, the company also has to deposit an equal amount of money in your PF account. But practically, you are the one who collects the capital of both. Because nowadays the CTC salary that the company tells you includes its PF Contribution.

EPFO Management

Under the EPF scheme, the responsibility of handling the money collected from millions of employees is given to the Employee Provident Fund Organization-EPFO. The Government of India runs this organization. But its board also consists of leaders of employee organizations. This organization makes the rules for the PF scheme and invests the money at the right place. All companies collect PF money from their employees and deposit it with this organization.

Pension scheme

The pension scheme is also associated with the EPF scheme. The money which is deducted in the EPF scheme, some money is deducted from it and gets deposited to the pension account. This is why you get a pension after retirement. If an employee dies during service, then his family members understand this pension. The government has fixed a premium of at least 1000 rupees per month after serving for ten years.

 Interest 

You also get interested in the money deposited in EPF. It is more than any Bank Deposit or PPF account. It is usually more than 8 per cent. EPFO ​​invests the deposits in this scheme in bonds and shares. This gives him interest, and he is also able to pay attention to his members.

Claims

Calculations

Claims under the EDLI scheme are calculated based on the last 12 months basic salary + DA received by the Employee. The claim for this insurance cover will be 30 times the last basic salary + DA. With this, a bonus of Rs 1.50 lakh is given. For example, if basic salary + DA is Rs 15000, then insurance claim (30 x 15,000) + Rs 1,50,000 = Rs 6 lakh.

Insurance amount

If the EPF subscriber dies prematurely, his nominee or legal heir can claim for insurance cover. If the minor who claims is less than 18 years, then his or her guardian can request on his or her behalf. For this, the insurance company will need to give the death certificate of the employer, the succession certificate, guardianship certificate and bank details if claimed by the guardian on behalf of the minor nominee.

If there is no nominee of the PF account, then the legal heir can claim this amount. To withdraw money from PF account, along with the form to be deposited with the employer, Form 5 IF of insurance cover will also have to be submitted. The employer will verify this form.

 If the employer is not available, the form must be verified by one of the following:

  • Gazetted officer
  • Magistrate
  • President of Gram Panchayat
  • Chairman / Secretary / Member of Municipal or District Local Board
  • Postmaster or sub-postmaster
  • MP or MLA
  • Member of Regional Committee of CBT or EPF
  • Bank manager

Attested copy of application form, along with all supporting documents, has to be submitted to the Commissioner. The claim amount will be received after it is verified.

Official Website

More details can be found on the official online portal.

Frequently Asked Questions

Q. What is the Employees Provident Fund?

EPF or Employee Provident Fund is a retirement saving scheme. That is, you save money in this account for the days of retirement. As soon as you get a job, saving for your retirement starts through this scheme.

Q. Is it necessary to have an EPF account?

Yes, if you work in a private company, then you have to deposit money in the EPF scheme. This is government law. Government employees do not invest money in it as there is a separate GPF scheme for them. Or they invest in the National Pension Scheme.

Q. How do I calculate the claims?

Claims under the EDLI scheme are calculated based on the last 12 months basic salary + DA received by the Employee. The demand for this insurance cover will be 30 times the previous basic salary + DA. With this, a bonus of Rs 1.50 lakh is given. 

Q. Will I get a pension if I have an EPF account?

Yes, the pension scheme is also associated with the EPF scheme. The money which is deducted in the EPF scheme, some money is deducted from it and gets deposited to the pension account. 

Q. What is EDLI?

The EDLI or Employees Deposit Linked Insurance scheme can be claimed on behalf of the nominee of the Member Employee by the Employee in case of illness, accident or natural death. Now, this benefit will also be given to the aggrieved family of employees who has worked in more than one establishment within 12 months immediately before death. 


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WRITTEN BYVarsha Verma

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