If you are looking to open an EPF account, you should know that some companies are required to register, while others are voluntary. It is mandatory for companies that have more than 20 employees, and it allows you to withdraw partial funds for a specified purpose. In addition, this account is tax-free, so you should always try to open one to reap maximum benefits. Here are some tips that will help you get started:
Employee Provident Fund (EPF) is a retirement benefit scheme in India
If you are in a job with a fixed end date and you wish to withdraw your money, you can do so with a small sum of money from your EPF account. Usually, you can withdraw up to 75% of your EPF fund after one month of unemployment. The remaining 25% can be withdrawn after two months of unemployment. If you die or become disabled, your nominee will get the remainder of your EPF fund.
To access the EPF portal, you need to enter your UAN number and password. If you have already registered with the EPFO, you need to link this number to your KYC details. To register, visit the Employee Provident Fund Organization website. There, you will find a drop-down menu under the “Our Services” tab. Click on “Member Passbook” to get started.
To get started with EPF, you must submit your UAN to your employer and KYC documents. Once you have completed this step, you can then login to the EPFO website to withdraw your EPF. Once you have done so, you’ll be able to make transfers of your EPF, update your KYC information, and check your EPF balance. And if you are unsure of your UAN number, you can contact the EPFO to see whether your UAN is still active.
The EPF is tax-exempt. This means that any contributions you make are tax-free during the year in which you make them, and at the time of withdrawal. Employer contributions are also tax-exempt up to a certain limit. The new budget proposes a new limit to this benefit. Once you’re over 58, you can receive a pension and continue to save for your future.
You may use the money from your PF account to pay for medical expenses, buy a plot, or take out a home. Your contributions are also tax-deductible under section 80C of the Income Tax Act. The accumulated fund will help you build a sufficient retirement corpus. In addition, you can withdraw some or all of your EPF contributions when you have unforeseen expenses.
It is mandatory for companies with more than 20 employees
The process of setting up an EPF account begins with registration. Companies with more than 20 employees must comply with the EPF Act. Smaller companies without the required minimum strength can voluntarily register. However, late registration penalties apply. In addition to large companies, co-operative societies with fifty or more employees must also register. Applicants must submit their UAN number and other details when applying for an account.
Employers contribute 8.33% of their monthly wages to the EPF. This amount is calculated based on the employee’s salary, which is Rs. 15,000 or more. Employers can also contribute more than the minimum amount. When companies have more than 20 employees, their employees must contribute to the EPF. If an employee changes employers, they can transfer their balances to their new employer. A company must also comply with the EPF rules and regulations.
EPFO has updated the rules regarding EPF accounts. Those with an EPS account must add a nominee by 31 December 2021. This will ensure that the funds will be transferred smoothly when an employee changes jobs. Nomination can be completed online or offline. Nomination can provide access to funds for loved ones. Further, an EPF account must be managed by an employee, whose employer must approve the change.
The interest rate for the EPF is capped at 3%. While it is possible to join an EPF account later, companies can’t opt out of it. The interest rate is proposed by EPFO every year. It is then sent to the Ministry of Finance for approval. Once the amount of employees contributes to an EPF account, it can earn a tax-free balance of up to Rs. 20 million.
Start-ups with fewer than 20 employees are also allowed to apply for EPF approval. However, this comes with risk. While employees in start-up companies are required to contribute 12% of their monthly salary to an EPF account, their employer is also required to contribute. If the start-up goes bankrupt, the employees won’t contribute. And if the company has not paid for 36 months, the account will be null.
It is tax-free
In order to maintain the tax-free status of your EPF account, you must contribute at least the maximum amount allowed by law. In most cases, this limit is Rs. 2.5 lakh, or Rs. 5 lakh if you are a government employee. There are other limits, too. Your contribution must be above the limit to be tax-free, as well as any interest earned on the contributions. If you withdraw from your account, the interest you earned will be taxable.
Employee contributions to an EPF account are not tax-deductible, but the employer contribution is. In this case, the employee must show their PAN and ID proofs. While the employer contribution is fully tax-deductible, it will be shown as salary TDS in Form 26AS if you withdraw it within five years of opening the account. The only exception to this rule is if you are self-employed.
The interest you earn on your EPF account is tax-free, but the interest rate does not match the long-term returns offered by other types of investments. If you need money during your employment, you can withdraw your PF account funds tax-free. You must complete at least five years in order to withdraw your entire corpus, but if you are self-employed, this period is even longer, then you can withdraw your entire balance tax-free.
The income tax rules have changed as well. The Employee Provident Fund Organization has decided to increase the interest rate from 8.5% to 8.1% in the 2021-22 fiscal year. Earlier, the interest on EPF contributions was tax-free for contributors. However, the government plans to change this policy in the next few years. This will make the interest on EPF contributions taxable once they reach a certain threshold.
The VPF scheme is a similar scheme that allows employees to invest in the VPF. However, it’s a bit more complex. Only salaried employees can invest in the VPF scheme. In addition, the amount of money invested through the VPF can’t exceed Rs 2.5 lakh per financial year. This means that the VPF contribution amount can’t exceed the amount in an EPF account.