Features of EPF and UAN:
EPF (Employee Provident Fund), or simply PF, is a major savings scheme in India for almost all salaried people working in the government, public, or private sector organisations. It’s a very important tool for retirement planning in our country. The tax-free (compounding) interest and the maturity amount ensure a steady growth of the money.
What is an EPF – Employee Provident Fund?
A provident fund is created to provide financial stability and security to elderly people. A person begins contributing to this fund when he/she starts out as an employee. The contribution, in most cases, is on a monthly basis. The purpose of an Employee Provident Fund (EPF) is to help employees save a part of their salary every month so that they can use it when the employee is no longer fit to carry on working i.e. when the employee has to retire from service. Both the employer and employee contributes to the EPF at a rate of 12% of the basic salary and dearness allowance (if any) every month. The total contribution to the EPF is thus 24% per month.
[MMS_EBOOK]
The Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation (EPFO) of India. Any establishment that has 20 or more workers employed in 180+ industries, as specified by the government, has to register with EPFO. The EPFO is a statutory body of the Union government, under the labour and employment ministry. It’s one of the biggest social security organisations in the world regarding the number of members and volume of transactions undertaken.
Interest on EPF
The rate of interest on EPF is determined by the Union government, in consultation with the central trustee board. The notification is available on the EPF website on an annual basis. The interest calculated on EPFs, for the 2015-16 fiscal, is 8.75%. While the contribution to EPF account is monthly, interest is calculated at the end of the fiscal.
There is an opening balance in the EPF account at the beginning of each fiscal which is the corpus accumulated till then. For the next fiscal, the new opening balance will be; old opening balance + monthly contribution all through the year + interest (contribution + old opening balance). Compound interest in EPF is paid on the credit amount standing in the employee’s name as on 1 April every year.
Nomination
EPF also offers nomination facility. Member-employees can nominate their father, mother, spouse or child. Brothers and sisters, however, cannot be nominated for the EPF. The nominee is contacted if the employee dies during the service period and the money is handed over. If the EPF member has a family (spouse and children) at the time of nomination, the nomination must be in favour of one or more individuals of the family.
A nomination in favour of a person not from the family is considered invalid. A fresh nomination has to be filed by the member upon his/her marriage and all nominations made before marriage will be considered invalid.
Nomination is important in PFs. The purpose of appointing a nominee is to have a person who is responsible and trustworthy for handling the nominator’s assets after his/her death.
Tax benefits
Contribution by the employer towards the EPF is exempt from tax. The employee’s contribution is taxable, but at the same time, eligible for the deduction, according to the provisions of section 80C of the Income Tax Act.
The money which an employee initially invests in the EPF, the interest earned thereon, and the money that you finally withdraw after a specific period (say five years), are all exempted from income tax.
Transfer of EPF and UAN
You can apply to withdraw your PF only if you are not employed for at least two months after quitting the previous job. It is recommended to transfer the accumulated PF amount while joining a new company instead of withdrawal because it forms the debt part of your investment portfolio and yields good tax-free returns.
The EPFO, as already said, is currently offering 8.75% as annual interest on PFs. Thus, it makes sense to stay invested. Withdrawal of the EPF corpus, before completion of five years of employment with an employer, is taxable. The amount is added to the salary income and taxed accordingly. But if left untouched, the EPF amount is entirely tax-free.
For instance, you have an EPF account for the past five years and you change the job and withdraw your PF amount. Now, all the income of the previous years will get recomputed from the beginning and will be taxable. Besides, the contribution of the employee and the interest earned, will be added to the current income, subject to relief under section 89.
Until October 2014, all employees had their respective EPF number, associated with the employer. A change in job meant that allotting of another PF number. It often led transferring the investment from one account to another. Multiple accounts were a big concern and the EPFO was inundated with complaints regarding transfer of funds from one account to the other. EFPO, to address this problem, launched the Universal Account Number (UAN) scheme.
Also read: Combining/Consolidating Multiple EPF Accounts through UAN
What is UAN?
The UAN is made of 12 digits allotted to all employees contributing to the EPF. The UAN is a landmark step to shift the EPF service to the online platform, making it more user-friendly. The UAN of the employee remains the same throughout the entire service life. It doesn’t change while changing jobs.
How is the UAN allotted and how are EPF and UAN linked?
1. The EPFO allots employers the UANs of all employees for which the employer contributes to the EPF. If you don’t have a UAN, maybe because it’s your first job, the employer will appeal to the EPFO for generating the number along with the member identification number (ID). The member ID is the number given by EPFO for allowing the employer to deposit your EPF money.
2. For an employee already having a UAN, the employer will request the EPFO to generate a new member ID for the employee. The member ID will then be linked to the employee’s UAN.
3. The employer will then give the UAN to the employee(s), who have to provide their know-your-customer (KYC) papers to the employer.
4. The employer will update the KYC details on the EPFO website.
How to check UAN status?
Website: After you have got the UAN from your employer, visit the EPFO website at http://uanmembers.epfoservices.in/ Click on the “Activate your UAN” tab. Read the instructions that come up and click on “I have read and understood the instructions”.
Information: You will then be asked to enter your UAN and mobile phone number. Next, you have to select your state and EPF office address from the drop-down menu. You also have to enter the member ID. Having entered these details, click on “get PIN”.
Authorisation: The PIN is generated and sent to your registered mobile number. The number has to be then submitted for completing the activation.
User ID and password: Once the activation is complete, you will be asked to create your login ID and password to access the UAN services.
Points to note: You can access the user manual on the website’s activation page that provides information on UAN activation and how to use the portal. Members can also download the UAN card once the registration is complete. They can also access the EPF passbook.
Also read: Here is how to generate UAN online from EPFO without employer
Benefits of UAN
The UAN extends several benefits to an employee. Here are some of them:
1. EPF transfers and withdrawals take a much lesser time.
2. There is no need to depend on the employer to forward claims regarding EPF transfer or withdrawal. The requests can be easily submitted online.
3. Details of all EPF accounts can be viewed at one place.
4. All EPF accounts will have greater transparency. The EPFO sends monthly SMS alerts on PF deposits and balance.
5. Soon, employees won’t have to apply to transfer their PF accumulation while changing jobs. The system is being developed and is expected to be introduced shortly.
[MMS_EBOOK]
FAQs on UAN
1. Do I still have to transfer my old PF account while changing jobs or will it be automatically merged?
At the initial stage of the UAN scheme implementation, you have to transfer from the old account while changing jobs. While the process is much convenient as it can be easily done online, in future, employees won’t have to apply separately in this regards.
2. How will the UAN help in the transfer or withdrawal process?
Since there will be no need for employee verification (because the KYC information is already seeded in the UAN), you won’t require to approach your former employer for transfer or withdrawal. You can apply online.
3. Can I upload my KYC papers via the member portal?
Yes, you can. Your employer must digitally approve the paper you upload. Till then, the status of your KYC will show as “pending”.
4. What has to be done if I change my job?
You simply have to declare the UAN to your new employer. Since June 2015, the UAN scheme has been made mandatory for all employers.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
If you do not have one visit mymoneysage.in
i worked in branch office at bhopal in a private ltd company for 24 years and their head office is at indore. In branch office almost 20 person were working but company decided to close down business in branch and they have closed all business activities in bhopal and from employees asked for resignations. Maximum employees tendered the same. I have also been asked to resign but I have not resigned from the services and I requested the management for my 2 months due salary,leave encashment and compensation but they refused to give the same. After 8 months i”ve filed the case for gratuity before ALC, and submitted my PF claim forwarded by ALC to the department before 3 months. At present PF authority are refusing my case verbally and suggested me to give the resignation and for compromise with the employer then they will decide for partial payment of PF. My question is how PF authority can enforce me to compromise And As per new law of PF authority, saying that your all benefits you can get after attaining the age of 58 years. Though I need money because i am unemployed since last 8 months and there’s no source of income. PF authority till to date have not returned my claim form also. Please advice.
Hi Siddhant,
FYI from feb 10th 2016 new withdrawal rules will be applicable wherein you can make only partial withdrawal(i.e. employee contribution and the interest accrued there on) full withdrawal can be done only after retirement,
The problem in your case is that u have not resigned or being terminated from the employment, even though i suggest you to file your grievance online on epfo portal also upload any evidence that you have. You can as well write to the vigilance officer at cvo@epfindia.gov.in and wait for 15 days, if it does not work file an RTI application to know the status of your claim.
I left my job in 2007 in Bangalore. How to get the UAN number now? I want to withdraw my pf.
Dear Mohan,
You can visit the link below to check the status of your UAN:
http://uanmembers.epfoservices.in/check_uan_status.php
I have an UAN and changed my job 6months back and waiting to get my current PF account linked to my UAN and provided my UAN details to my current employer at the time of joining, when I approached my current employer for the status I have been told that the PF authorities have created a new UAN instead of adding my current PF details by mistake and they are trying to resolve the same. can you please suggest what actions I should take right now.
Dear Raju,
Let me tell you that you have come to the right place. You may follow the steps below to get a solution to your problem:
1. Visit your UAN member portal & apply for transfer of PF amount from your old A/c to new PF A/c.
2. The EPFO system, in order to effect the transfer, will locate your UAN and will identify the discrepancy of existence of multiple UAN.
3. The old UAN will be deactivated & your old Member ID will be linked to new UAN.
4. After such deactivation, you will be informed by SMS to your registered mobile number.
5. Activate your new UAN to receive status updates of your EPF A/c.
Those employees whose company deposit PF in a trust seems to have no benefit of UAN
The cannot get passbook or online withdrawal .Kindly clarify this ambugity.Why govt. is not forcing all TRUST to join epf member portal for all online actions.
I am a fresher and joined my first company in July. I have a gross salary of 60,000 Rs. When I received my first income, only professional tax was deducted from it. PF and TDS were not deducted from my income. The company has over 500 employees. I have not been asked to opt for EPF as of now, and when I asked the concerned person about the PF, he said that they only deducted PF of people who had gross salary under 15000 Rs. Should I be concerned that PF and TDS are not being deducted from my income?