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www.personalfn.com Page 2 Prologue Dear Reader, Welcome! PersonalFN is pleased

www.personalfn.com Page 2 Prologue Dear Reader, Welcome! PersonalFN is pleased to bring to you a handy guide to one of the most popular investment destinations for the salaried person in the Government, public or private sector – the Employee Provident Fund! In this handy EPF Guide, you will know more about your monthly contributions, covering topics such as: - What is the EPF and what are its main features? - Historical EPF interest rates – will the EPF interest rate likely fall further? - EPF, EPS and EDLIS – See where your money is really going - How to calculate your EPF contribution - How to read an EPF slip - How to get your grievances redressed … and much more! So what are you waiting for? Just read on to know more… With warm regards, Team Personal FN www.personalfn.com Page 3 Index What is the Employee Provident Fund (EPF)? 4 What does your monthly EPF contribution go into? 4 What is the Employees’ Pension Scheme (EPS)? 4 What is the Employees’ Deposit Linked Insurance Scheme (EDLIS)? 5 Is the breakup of the contribution different for the employee and employer? 5 A Sample Calculation of the contribution break up? 6 What interest rate do you earn on your EPF contribution? How has the EPF interest 7 rate moved historically? How is interest credited? Can the EPF balance be checked online? 9 Is it possible to get an EPF e-Passbook? 9 What if the company has its own PF trust, can the balance still be checked online? 11 Can you withdraw your EPF money? 11 How do you read your PF account slip? 12 Is it illegal to withdraw the PF in between jobs? 14 What is a Voluntary PF? 14 What if you need more clarity regarding your EPF including on withdrawal, transfer etc? 14 Conclusion: From a Financial Planning perspective… 16 www.personalfn.com Page 4 What is the Employee Provident Fund (EPF)? The EPF is created by the Employees Provident Fund Organization (EPFO) of India, a statutory body of the Indian Government under the Labour and Employment Ministry. In essence, it states that an organization having 20 or more permanent (on-roll) employees, working in any of 180 plus industries, should register with the EPFO. A provident fund is a fund that is created, through contributions, to provide financial support to individuals above a certain age, such as post retirement age. The Employee Provident Fund is just such a fund. Contributions are made on a monthly basis, by both employees and employers, thereby encouraging employees to save a portion of their salary each month. Investments made by a vast number of employees across India are pooled together and invested by a trust. The EPF is a tax free investment instrument for the salaried class. Interest earned on it is tax free, and returns are also not taxed. You also get a deduction under Section 80C for contributions made towards your EPF. What does your monthly EPF contribution go into? Currently, the following three schemes are in operation under the EPF Act of 1952, and it is into these trusts that your monthly contributions go. These are as follows: a) Employees’ Provident Fund Scheme (1952) b) Employees’ Deposit Linked Insurance Scheme (1976) c) Employees’ Pension Scheme (1995) EPF, EPS and EDLIS are calculated on the basis of your Basic + Dearness Allowance (DA), which most organizations follow. Others consider your Basic + Dearness Allowance + Cash value of food allowance and retaining allowances if any. What is the Employees’ Pension Scheme (EPS)? This part of your monthly contribution is targeted towards offering pension on disablement, widow’s pension and pension for nominees. It is financed by diverting 8.33% of your monthly contribution away from the EPF and towards the EPS instead. This is kept to a maximum of 8.33% of Rs. 6,500, or Rs. 541.The government also contributes the equivalent of 1.17% of your monthly contribution towards the EPS. The purpose of the EPS is to provide for the following: www.personalfn.com Page 5 - Superannuation Pension: a member who retires after 20years of service and at or after the age of 58 years - Retiring Pension: a member who has rendered eligible service of 20 years and then retires before attaining the age of 58 years - Short Service Pension: for a member who has rendered more than 10 but less than 20 years of eligible service - Permanent Total Disablement Pension What is the Employees’ Deposit Linked Insurance Scheme (EDLIS)? Under this scheme, employees receive life insurance. The cost of the scheme is borne by the employer, but the life insurance received under this scheme is limited to the very low amount of Rs. 130,000. Most employers opt out for the EDLI and choose to have a group life insurance cover for their employees; this works out better for the employees and does not increase any cost to the employer. Is the breakup of the contribution different for the employee and employer? Yes, it is. An employee’s contribution goes directly into the EPF, while the employer’s contribution goes into the EPF, the EPS and the EDLIS. Here is how it is broken up: Employee: 12% into EPF This comes out of the employees’ salary. Employer: 3.67% into EPF 8.33% into EPS 0.5% into EDLIS 1.1% for EPF Administrative Charges 0.01% for EDLIS Administrative Charges The above contributions are borne by the employer. As you can see, you as an employee do not contribute to the life insurance premium charges. This is borne by your employer. Also, the administrative charges for both the EPF and the EDLIS are borne by the employer. Your contribution goes solely towards your EPF and your Pension. www.personalfn.com Page 6 Can you show me a calculation? There are 2 situations to consider: a Basic Salary of below Rs. 6,500 and a Basic of Rs. 6,500 or above. Let’s look at a Basic Salary of below Rs. 6,500 first. Employee A draws a Basic of Rs. 3,500. Here’s how the contribution works out: EPF Employee Contribution 12% Rs. 420 EPF Employer Contribution 3.67% Rs. 128 EPS Employer Contribution 8.33% Rs. 292 EDLIS Borne by Employer 0.50% Rs. 17.50 EPF Admin Charges Borne by Employer 1.10% Rs. 38.50 EDLIS Admin Charges Borne by Employer 0.01% Rs. 0.35 Now consider an employee drawing a Basic of higher than Rs. 6,500. In this situation the calculation can be done in a few different ways. Consider Employee B drawing a Basic of Rs. 7,500, here is how the contribution might be allocated under the first of the 3 possible calculations: Calculation 01: Here, the employer decides to contribute the EPF based on the Basic salary of Rs. 7,500, which is above the fixed limit of Rs. 6,500. So the total contribution comes to Rs. 900, or 12% of Rs. 7,500 So the EPS comes to Rs. 541. The balance of Rs. (900 – 541) then goes to the EPF. So the EPF contribution is Rs. 359. EPF Employee Contribution 12% of Rs. 7,500 Rs. 900 EPS Employer Contribution 8.33% of Rs. 6,500 Rs. 541 EPF Employer Contribution 12% of Rs. 7,500, less Rs. 541 Rs. 359 EDLIS Borne by Employer 0.5% of Rs. 6,500 Rs. 32.50 EPF Admin Charges Borne by Employer 1.1% of Rs. 7,500 Rs. 82.50 EDLIS Admin Charges Borne by Employer 0.01% of Rs. 6,500 Rs. 0.65 www.personalfn.com Page 7 Calculation 02: Alternatively, the employer might decide to calculate the EPS and EPF both on Rs. 6,500, the fixed upper limit. In this case the EPF and EPS contribution respectively would be Rs. 239 and Rs. 541. EPF Employee Contribution 12% of Rs. 7,500 Rs. 900 EPS Employer Contribution 8.33% of Rs. 6,500 Rs. 541 EPF Employer Contribution 3.67% of Rs. 6,500 Rs. 239 EDLIS Borne by Employer 0.5% of Rs. 6,500 Rs. 32.50 EPF Admin Charges Borne by Employer 1.1% of Rs. 7,500 Rs. 82.50 EDLIS Admin Charges Borne by Employer 0.01% of Rs. 6500 Rs. 0.65 Calculation 03: Here, the employer might decide to calculate the EPF, the EPS and the employee’s share towards EPF as well, on the specified upper limit of Rs. 6,500. This is despite the fact that the employee is drawing a Basic of more than Rs. 6,500! So the contribution would be as follows: EPF Employee Contribution 12% of Rs. 6,500 780 Rs. 780 EPS Employer Contribution 8.33% of Rs. 6,500 541 Rs. 128 EPF Employer Contribution 3.67% of Rs. 6,500 239 Rs. 239 EDLIS Borne by Employer 0.5% of Rs. 6,500 37.5 Rs. 32.50 EPF Admin Charges Borne by Employer 1.1% of Rs. 6,500 82.5 Rs. 71.50 EDLIS Admin Charges Borne by Employer 0.01% of Rs. 6,500 0.75 Rs. 0.65 As you can see, the first method would be the most beneficial to the employee, as the actual Basic is considered, and there is no upper limit of Rs. 6,500. However, what method is chosen can vary from company to company, so do check with your own company about what method they uploads/s1/ epf-guide.pdf