Know all about Employee Provident Fund (EPF) Applicability & Taxability By CS Annu Sharma

Dear Professionals,

I believe you all are doing well, in my below-mentioned write I have penned some of my research on EPF the term which annoys every salaried employee and professional, you may know it as that annoying, elusive chunk of your monthly salary that you aren’t able to spend. So what is it, and where does it go? Many queries can be resolved through this.

What is EPF?

You may know it as that annoying, elusive chunk of your monthly salary that you aren’t able to spend. So what is it, and where does it go?

Employee’s Provident Fund (EPF) is a retirement benefits scheme that’s available to all salaried employees. This fund is maintained and overseen by the Employees Provident Fund Organization of India (EPFO) and any company with over 20 employees is required by law to register with the EPFO. It’s a savings platform that helps employees save a fraction of their salary every month that can be used in the event that you are rendered unable to work, or upon retirement.

Let’s Understand the Term Legally-

Employees Provident Fund is established in 1952 and hence the act is named as Employees Provident Fund & Miscellaneous Provisions Act, 1952, which extend to the whole of India except Jammu & Kashmir.

Employee Provident Fund (EPF)

Provident fund is a welfare scheme for the benefits of the employees. Under this scheme both the employee & employer contribute their part but the whole of the amount is deposited by the employer. Employer deducted the employee share from the salary of the employee. The interest earned on this investment is also credited in pf account of the employees. At the time of retirement, the accumulated amount is given to the employees, if certain conditions are satisfied.

Applicability of the Act

It is applicable:

a) Every factory engaged in any industry specified in Schedule 1 in which 20 or more persons are employed;

b) Every other establishment employing 20 or more persons or class of such establishments which the Central Govt. may notify;

c) Any other establishment so notified by the Central Government even if employing less than 20 persons.
Every employee, including the one employed through a contractor (but excluding an apprentice engaged under the Apprentices Act or under the standing orders of the establishment and casual labourers), who is in receipt of wages up to Rs.6,500 p.m., shall be eligible for becoming a member of the funds. The condition of three months’ continuous service or 60 days of actual work, for membership of the scheme.

What are the Types of Provident Fund?

  • Statutory Provident Fund (SPF)
  • Public Provident Fund (PPF)
  • Recognized Provident Fund (RPF)
  • Unrecognized Provident Fund (URPF)
Statutory Provident Fund (SPF)

It is a provident fund registered under Provident fund Act, 1925. They are also known as government provident fund. So, the employees who are meant for govt, semi-govt employees, university or educational institutions affiliated to a university established under the statue or other specified institution would be qualified to give to them.

Public Provident Fund (PPF)

PPF is covered under Public Provident fund Act, 1968. Any member of the public whether employed or not can invest in PPF. Minimum Contribution in this fund is Rs. 500 & Maximum amount is 1, 50,000 per year. The contributions made to the scheme along with the interests are repayable after 15 years unless extended. The rate of interest, at present, under the scheme is 8% per annum.

Recognized Provident Fund (RPF)

This Scheme is registered under Employee’s Provident Funds and Miscellaneous Provisions Act, 1952. According to the act, any person who employees 20 or more employees is under an obligation to register himself under this Act. Any person can register himself by their choice whether they had less than 20 employees.

Unrecognized Provident Fund (URPF)

A scheme started by the employer and the employees in an establishment, whether approved by the commissioner of Income Tax is called an unrecognized provident fund.

What is Taxability Impact of PF?

Deduction of PF can be claimed under section 80C while calculating Income Tax & when the employee withdraws the amount of PF & Interest after the retirement then, PF amount & Interest amount is not taxable.

PF can be accumulated withdrawn by the employee if he is unemployed for more than 2 months. 75% PF can be withdrawn after the employment of 1 month &   rest 25% PF can be withdrawn after the unemployment of 2 months. It is on the choice of the employee after withdrawn of 75% amount that they should continue with the PF account or want to withdrawal the whole amount.

Income Tax Liability on PF withdrawal





Amount withdrawn is < Rs 50,000 before completion of 5 continuous years of service


But while filling return amount of pf shall be shown.


Amount withdrawn is > Rs 50,000 before completion of 5 years of continuous service

TDS @ 10% if PAN is furnished;

No TDS in case Form 15G/15H is furnished


Withdrawal of EPF after 5 years of continuous service

TDS @ 10% if PAN is furnished;

No TDS in case Form 15G/15H is furnished


Transfer of PF from one account to another upon a change of job


No need to mention in return as the amount is not taxable


Before completion of 5 continuous years of service\ if

employment is terminated due to the employee’s ill health

The business of the employer is discontinued

or the reasons for withdrawal are beyond the employee’s control


Further, the individual need not offer the same in the return of income as such withdrawal is exempt from tax

PF Contribution Rate

The contribution of Pf paid by employer & employee is 12% (basic pay + dearness allowance + retaining allowance) Equal contribution is paid by the employer & employee. The establishment which employees less than 20 persons shall be restricted to contribute 10% for both employee & employer contribution.

It is voluntary for the employees who draw a salary less than 15000 per month to become the member of EPF. The employee who drawn a salary more than 15000per month at the time of joining is not required to make PF contribution. If they want to become the member of EPF, then they become with the consent of the Employer & Assistant PF Commissioner.

The entire 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer, while the balance 8.33% from your employer’s side is diverted to your EPS (Employee’s Pension Scheme) and the balance goes into your EPF account.

The breakup of EPF Contribution

  • 12% of the employee’s salary goes towards the EPF.
  • Whereas the employer’s contribution is divided as below:
  1. 67% goes towards contribution for EPF
  2. 33% goes towards contribution for EPS
  3. 5% goes towards contribution for EDLI
  4. 1% goes towards contribution for EPF administration charges
  5. 01% goes towards contribution for EDLI administration charges
Therefore, the employer contribution is 13.61%. The premium and management charges are borne by the employer and the maximum limit is set at 0.5% of Rs.15, 000.

What is Universal Account Number (UAN)?

It is a 12 digit number allotted to the employee who is contributed to EPF. It remains same throughout the life of the employee. It does not change with the change of Job. It will help in easy transfer and withdrawals of claims. Along with the service of Online Passbook, SMS Service on each deposit of contribution & online KYC update can be provided on the basis of UAN. But before that UAN need to be activated on the EPFO portal.

The member who is unable to withdraw PF for any reason can withdraw without the consent of the employer. They can submit FORM 19 for EPF (Employees Provident Fund) and FORM 10C for EPS (Employees’ Pension Scheme) with any of the following official’s attestation to EPFO office in which their EPF account is maintained.

  • Any gazetted officer
  • The Magistrate
  • The Post/ Sub Postmaster
  • President of the Village Union
  • President of the Village Panchayat where there is no Union Board
  • Chairman/ Secretary/ Member of the Municipal/ District Local Board
  • Member of the Parliament or Legislative Assembly
  • Manager of the Bank in which your savings Bank Account is currently maintained
  • Head of Educational Institution which is recognized by Government
  • Any authorized official, as may be approved by the commissioner
Hope the information will assist you in your Professional endeavours. 
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